December WPI inflation at 8-month low of 3.8%, increases rate cut hopes

Second consecutive month of decline in wholesale price index-based inflation... Rate was 4.64% in November and 5.54% in October

and 8.61 per cent, respectively, and for liquified petroleum gas (LPG) it was 6.87 per cent during December.

"The continuing deceleration in the growth of WPI and softening of global fuel prices provide ample opportunity to MPC (monetary policy committee) to cut down policy rate at earliest which will kick start investment and revival in overall industrial growth," Assocham said.

Inflation in manufactured items slowed to 3.59 per cent in December, from 4.21 per cent in November. Among food articles, potato prices became cheaper substantially with inflation at 48.68 per cent in December, as against 86.45 per cent in November.

Inflation in pulses stood at 2.11 per cent, while in 'egg, meat and fish' it was 4.55 per cent.

Onion witnessed deflation of 63.83 per cent in December, compared to 47.60 per cent in November. Deflation in fruits was at 3.69 per cent in December, as against 2.49 per cent in the previous month.

The 3.80 per cent inflation is the lowest in 8 months, and a lower inflation than this was

last seen in April at 3.62 per cent.

The Reserve Bank of India (RBI) mainly takes into account retail inflation data while formulating monetary policy.

In its fifth monetary policy review for the fiscal, last month, the Reserve Bank kept interest rates unchanged, but held out a promise to cut them if the upside risks to inflation do not materialise.

The central bank has lowered retail inflation projection to 2.7-3.2 per cent for the second half of the current fiscal, citing normal monsoon and moderate food prices.