India's headline inflation accelerated unexpectedly to nearly seven percent last month, data showed Wednesday, dimming hopes of an early interest rate cut to offset slowing economic growth.
The closely watched Wholesale Price Index rose to 6.95 percent from a year ago in February, driven by higher food costs and increased fuel prices as global oil costs boosted the country's import bill.
The inflation reading was higher than the 6.55 percent rate logged in January, which was a 26-month low and exceeded analysts' expectations of around a 6.80 percent year-on-year rise.
The latest prices data came a day ahead of a Reserve Bank of India policy meeting in Mumbai.
Late last week, in a move to spur slackening economic growth, the bank moved to crank up lending by lowering the amount of cash commercial banks must keep in reserve.
But analysts expect the bank to wait until after the budget is presented on Friday to assess the inflationary impact of the government's spending plans before starting to unwind its aggressive monetary policy.
The central bank raised rates 13 times between March 2010 and October 2011, which have contributed to a slowdown in the economy.
For the full financial year to March, India's economy will probably grow by 6.9 percent -- far below an initial projection of nine percent -- and down from last year's 8.4 percent expansion, the government forecast last month.
However, some private economists expect growth to be at the bottom end of the six percent range.
Inflation was nudging double-digits for most of 2011, fuelled by surging food prices that heaped misery on India's hundreds of millions of poor who are also the backbone of the ruling Congress party's support.