India's wholesale inflation rises slightly in February

By Sarita Chaganti Singh

NEW DELHI (Reuters) - India's wholesale inflation in February rose to 2.38% year-on-year, slightly above 2.31% in January as a slowing food price increase was offset by a narrower drop in fuel prices, government data released on Monday showed.

The wholesale inflation, a proxy for producer prices, was marginally higher than the 2.36% projected by economists in a Reuters poll.

Wholesale food prices rose 5.94% in February, slowing from a 7.47% rise in January.

Cereal prices rose 6.77% in February, against a 7.33% rise a month earlier.

Vegetable prices fell 5.80%, compared to an 8.35% rise in the prior month. However, prices of potatoes, onions and fruits rose between 21% and 48%.

"The downward pressure on the headline print on account of the dip in food inflation was offset by the narrowing deflation in the fuel and power segment," said Rahul Agrawal, economist at ICRA.

Fuel and power prices dropped 0.71% year-on-year, compared with a 2.78% drop in January.

Prices of manufactured products, which account for about 64% of the wholesale price index, increased 2.86% after rising 2.51% rise in January.

Inflation pressures in the South Asian country have been easing in recent months as favourable weather has helped vegetable output and improved supplies, raising expectations for more interest rate cuts in the coming months.

India's retail inflation fell below the central bank's 4% target in February mainly due to a decline in vegetable prices, government data showed last week.

(Reporting by Sarita Chaganti Singh and Aftab Ahmed; Editing by Varun H K)