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Inflation declines to 7.24% due to lower vegetable prices

Dec 14 2012, 16:44 IST
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Food inflation, as a category, rose to 8.5 per cent during the month, from 8.32 per cent a  year ago. Food articles have 14.3 per cent share in the WPI basket. (Reuters) Food inflation, as a category, rose to 8.5 per cent during the month, from 8.32 per cent a year ago. Food articles have 14.3 per cent share in the WPI basket. (Reuters)
SummaryVegetables prices decreased by 1.19 per cent in November this year.

Inflation declined to 7.24 per cent in November mainly on account of lower prices of some vegetables, giving a cue to RBI to consider interest rate cut next week to promote sagging growth.

Vegetables prices decreased by 1.19 per cent in November this year as compared to surge of 10.68 per cent in same month a year ago.

Inflation, as measured by the Wholesale Price Index (WPI), came down to 7.24 per cent in November from 9.46 per cent in the same month a year ago.

However, prices of some food items like potato, wheat, cereals, rice, pulses, edible oil and sugar went up during the period.

Inflation, as measured by the Wholesale Price Index (WPI), stood at 7.45 per cent in the previous month.

"It is a welcome trend if inflation rate has come down... We should work towards more comfortable level of inflation which is 5-6 per cent," Prime Minister's Economic Advisory Council Chairman C Rangarajan said.

Planning Commission Deputy Chairman Montek Singh Ahluwalia termed moderation in inflation as a "very good signal".

"The time has come to recognise that inflation is clearly softening and growth is weak and I am sure that RBI knows what to do", he added.

Yesterday RBI Deputy Governor K C Chakrabarty said cutting the repo rate (at which RBI lends to banks) will be possible only when inflation comes down. However, he expected inflation to come down in about 2-3 months.

Meanwhile, retail inflation in November moved up to 9.90 per cent, mainly on account of higher prices of sugar, vegetables, edible oil and clothing.

Chief Economist, HDFC Bank said inflation in November is much lower than what economists had expected and this should also encourage the RBI for more monetary expansion.

Chief Economist, Kotak Mahindra Bank Indranil Pan, said that Inflation data is positive but for RBI to react, the retail inflation needs to come down.

"On December 18 policy of RBI, we are expecting only CRR cut to happen. We expect a cut by 25 basis points in the CRR. Rate change is expected only in January," he added.

Food inflation, as a category in the WPI, rose to 8.5 per cent during the month, from 8.32 per cent a year ago. Food articles have 14.3 per cent share in the WPI basket. Though vegetables in general registered a decline, Potato and onion

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