Inflation eases to 9-month low, RBI interest rates seen on hold for now

Mar 15 2014, 10:39 IST
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Wholesale prices, long seen as India's main inflation measure, eased to a 9-month low of 4.68 per cent in February. Wholesale prices, long seen as India's main inflation measure, eased to a 9-month low of 4.68 per cent in February.
SummaryIn January, wholesale prices, long seen as India's main inflation measure, rose 5.05 per cent.

Inflation in India falls to nine-month low of 4.68 per cent in February due to easing prices of kitchen staples like onion and potato, creating some headroom for RBI to cut interest rate in its forthcoming monetary policy.

The food inflation, based on Wholesale Price Index (WPI), dropped to 8.12 per cent in February, compared to 8.8 per cent in the previous month as the rate of price rise slowed in almost all items, except fruits and milk.

Inflation, which is on decline since December, was 5.05 per cent in January. Prior to February, the lowest WPI was recorded in May 2013 at 4.58 per cent. In June, it had inched up again to 5.16 per cent.

As per the data released today, rate of price rise for onions - on annual basis - contracted 20.06 per cent in February. Similarly rate of price rise in potato slowed to 8.36 per cent.

The overall inflation in the vegetable basket dropped to 3.99 per cent, from 16.6 per cent in January. There was also a drop in prices of pulses, cereals and wheat.

However, fruits, milk and other protein-rich items like egg, fish and meat became costlier in February compared to the previous month. Inflation in fruits was 9.92 per cent as against 5.32 per cent in January and in milk it was 8.45 per cent compared to 7.22 per cent.

Inflation in the manufactured items, like sugar and edible items, was 2.76 same as in January.

Meanwhile, December inflation has been revised upwards to 6.4 per cent, from 6.16 per cent estimated earlier.

The Reserve Bank of India, which has maintained a hawkish interest rate regime to tame inflation, is scheduled to announce the next monetary policy on April 1. Industry has been demanding a cut in interest rates to boost economic growth, which has slowed to a decade-low level.

The retail inflation, based on Consumer Price Index and also factored in by RBI, fell to a 25-month low of 8.1 per cent in February.

BSE Sensex

HIGHLIGHTS

* Feb WPI inflation eases to 25-month low of 4.68 pct

* Core WPI inflation edges up to 3.15 pct in Feb

* Cooling inflation seen RBI leaving rates steady on April 1

* Some analysts see rate hikes resuming in Sept quarter

India's wholesale inflation eases to 9-month low, rates seen on hold for now

(Reuters) India's wholesale price-based inflation eased to a nine-month low in February as food and fuel prices moderated, raising expectations

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