Inflation falls to two-year low

NEW DELHI — India's annual inflation rate fell to a two-year low of 7.47 per cent in December, offering relief to policy-makers ahead of crucial state elections.

The inflation, based on the wholesale price index (WPI), was 9.11 per cent in the previous month on the back of easing food prices.

It was at 9.45 per cent during the corresponding month of 2010.

Seeing the data released by the Commerce and Industry Ministry yesterday, Finance Minister Pranab Mukherjee said inflation would continue to moderate in the coming months and it would be in the range of 6-7 per cent by March.

"Along with the IIP numbers for November 2011, the recent headline inflation figures indicate some improvement in the overall macro-economic parameters in the second half of 2011-12," Mukherjee said.

Inflation had remained stubborn- ly near double-digit for the last two years. The easing in inflationary pressure and a rebound in factory output in November, it is hoped, will give the Reserve Bank of India to cut interest rate when it reviews monetary policy on January 24.

The RBI last month kept policy rates unchanged after hiking the key rates 13 times since the beginning of 2010.

However, the general inflation is still much above the central bank's comfort level of 4-5 per cent.

The build-up inflation in the financial year 2011-12 till December was 4.95 per cent compared to a build-up of 7.12 per cent in the corresponding period of the previous year.

The primary articles inflation fell to 3.07 per cent while food inflation dropped to 0.47 per cent. Several food items including onions, potatoes and other vegetables and wheat became cheaper year-on-year.

In fact, the food inflation was in the negative zone in the last two weeks of December.

Annual food inflation was recorded at minus 2.9 per cent for the week ended on December 31 and minus 3.36 per cent in the previous week, which was the lowest since April 2006. However, inflation in manufactured goods remain on an elevated level. Manufactured products, having 64.97 per cent weight in the WPI, registered a price rise of 7.41 per cent in December year-on-year.

The finance minister said high inflation in manufactured products continued to remain a "cause of concern" but hoped that it would ease in the coming months.

"Moderation in inflation would continue in the coming months though softening in the prices of manufactured goods despite the rapid decline in non-food primary inflation may be more gradual,” he said. — IANS