India’s inflation inches up 0.11pc in Dec

India s wholesale inflation rose marginally in December thanks to a increase in food costs, data showed on Wednesday, but analysts said hopes were still high of an interest rate cut next month.

The Wholesale Price Index (WPI), India s inflation measure with the biggest basket of goods, rose a lower-than-expected 0.11 percent from a year earlier as food prices ended their six-month drop.

The figure, which was below analyst forecasts of about 0.4 percent, compares with zero percent recorded in November - - the lowest rate since July 2009.

Analysts say Reserve Bank of India (RBI) governor Raghuram Rajan s aggressive policies to curb price rises, which hit hard millions of poor, appear to be paying off overall.

The sharp fall in global crude oil prices has also recently helped keep inflation in check in India, which imports most of its fuel. "Another very favourable reading for the WPI in December has reinforced the case for the RBI to begin a monetary policy easing cycle soon," said Rajiv Biswas, Asia-Pacific Chief Economist for IHS. A hopeful Siddharth Roy, economic advisor to vehicle-to-steel giant Tata Group, said "the RBI should not wait any longer" to cut rates.

Business has been clamouring for a reduction in borrowing costs to boost investment and stimulate the faltering economy, which has been mired in the biggest slowdown since the 1980s.

Expectations of a cut dwindled a little on Monday when figures showed con- sumer inflation rose for the first time in five months, to 5.0 percent. But promising figures for the economy released simultaneously showed a growth in monthly industrial output, reversing a sharp fall. The RBI has resisted calls to loosen rates, insisting on first winning the battle against high prices.

"The message I have been sending is that we don t want to flip-flop back and forth. That s not how a central bank operates," Rajan said late last month. The RBI, which will review its monetary policy on February 3, has not cut rates since May 2013. India s economy grew 4.7 percent last year and the RBI expects it to expand 5.5 percent this year -- far below the near double-digit growth needed to generate employment for tens of millions of new entrants to the job market.