Inflation declines to 5-month low at 6.16 pc, RBI may ease interest rates to prop up growth

Jan 15 2014, 16:59 IST
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Food prices rose 13.68 per cent year-on-year in December, much slower than an annual rise of 19.93 per cent in November. Food prices rose 13.68 per cent year-on-year in December, much slower than an annual rise of 19.93 per cent in November.
SummaryInflation in food articles was 13.68 pc in December as against 19.93 pc in the preceding month.

Wholesale inflation declined to a five-month low of 6.16 per cent in December, providing space to the Reserve Bank to ease interest rates and prop up growth.

Inflation in food articles was 13.68 per cent in December as against 19.93 per cent in the preceding month, according to the Wholesale Price Index (WPI) data released today.

Vegetables as a whole were costlier by 57.33 per cent, although the pace of increase in onion prices eased to 39.56 per cent from 190.34 per cent in November.

However, the rate at which potato prices rose was more than double at 54.65 per cent in December over the previous month.

Fruits were marginally cheaper as were protein-rich items such as eggs, meat and fish. Inflation in milk inched up slightly to 6.93 per cent.

Inflation in November was 7.52 per cent and in October, it was revised upward to 7.24 per cent from 7 per cent.

Earlier this week, the government said retail inflation fell to a three-month low of 9.87 per cent in December.

With industrial output contracting 2.1 per cent in November, the worst performance in six months, industry has sought a reduction in policy rates to help boost growth.

The Reserve Bank kept key policy rates unchanged last month on expectations that wholesale and retail inflation would ease. The central bank is scheduled to announce its quarterly monetary policy review on January 28.

The RBI had increased the key policy rate (repo) twice between September and November to check inflation. The rate is currently 7.75 per cent.

According to the WPI data, inflation in primary articles basket and the fuel and power segment was at 10.78 per cent and 10.98 per cent, respectively.

Inflation in manufactured products such as sugar and edible oils was flat at 2.64 per cent on a monthly basis.

December headline inflation eases to 5-month low

(Reuters) ndia's headline inflation eased to a five-month low in December on lower vegetable prices, providing some relief to the ruling coalition before a national election and increasing the odds that interest rates will stay on hold this month.

The Congress party is struggling to win back voters but is grappling with its worst economic slowdown in a decade amid surging food prices that have largely affected the country's rural poor.

The wholesale price index (WPI), India's main inflation indicator, climbed an annual 6.16 percent last month, its slowest pace since July 2013. The reading compared with a 7.00 percent rise

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