Inflation zoomed towards the double-digit mark at 9.89 per cent in February, the highest

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in 16 months, driven mainly by rising prices of essential food items and the hike in excise duty on fuel announced in the Budget.

The wholesale price-based inflation shot up 1.34 percentage points in February over 8.56 per cent in the previous month.

The figure has already surpassed the RBI's year-end projection of 8.5 per cent in January and "could cross the double-digit mark in March," said Chief Statistician Pronab Sen.

Finance Minister Pranab Mukherjee had earlier said the across-the-board hike in excise duty by 2 per cent in the Budget would push up the wholesale price-based inflation by only 0.41 per cent.

Among food items, prices of sugar, pulses and potatoes increased by 55 per cent, 36 per cent and 30 per cent, respectively during the year.

The fuel price index shot up by over 10 per cent, mainly on account of higher prices of petrol and diesel. While petrol became dearer by 11.73 per cent, diesel prices increased 8.85 per cent.

With inflation slowly spreading from food items to other areas, analysts say the RBI may tighten money supply further by raising interest rates in its April policy.

Already, some banks, including ICICI Bank, HDFC group, and the Bank of India have raised interest rates.

"To tame inflation, RBI could raise short-term lending and borrowing rates by 25 basis points each," Crisil principal economist D K Joshi said