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India's inflation eases to 7-month low of 5.05 percent

Posted on Feb 14 2014 | IANS

New Delhi, Feb 14 : India's wholesale price-based inflation fell to 5.05 percent in January, the lowest level in seven months, on the back of slower increase in food and vegetables prices, government data showed Friday.

India's main inflation indicator measured in terms of the Wholesale Price Index (WPI) was at 7.31 percent in the corresponding month of last year and 6.16 percent in December 2013.

Food inflation eased to 8.8 percent in January from a high of 13.68 percent in the previous month, according to data released by the ministry of commerce and industry here.

Vegetable prices that surged by 57.33 percent year-on-year in December posted a slower increase of 16.6 percent in January.

Onions became costlier by 6.59 percent in January after jumping by 39.56 percent in the previous month year-on-year.

Potato price jumped by 21.73 percent, cereals became costlier by 9.27 percent, fruits became dearer by 5.32 percent and milk price rose by 7.22 percent during the month under review.

However, pulses became cheaper by 6.10 percent.

Inflation in manufactured products eased to 2.76 percent and fuel and power inflation dropped to 10.03 percent during the month under review.

The government has kept November WPI inflation data unchanged at 7.52 percent.

According to data released by the Central Statistics Office (CSO) earlier this week, India's retail inflation based on the Consumer Price Index (CPI) declined to 8.79 percent in January, the lowest level in two years.

Softening in both wholesale and retail inflation would give relief to the economic policymakers, who have been struggling to contain the price rise.

The Reserve Bank of India (RBI) last month hiked key policy interest rates by 0.25 percent to tame inflation.

"It is a good sign that the pace of inflation is finally coming down both at wholesale and retail level. We expect this trend to continue in the coming months giving more elbow room to the RBI for an accommodative interest rate policy," said Rana Kapoor, president of industry lobby Assocham.

Kapoor, who is also chairman Yes Bank, said the RBI must ease monetary policy to revive economic growth.

"An easy interest rate policy would not only create additional demand at the consumer level, it will also bring down substantially cost of borrowing for the industry," he said.

Build up inflation in the first 10 months of the current fiscal stands at 5.17 percent, lower from 5.78 percent posted in the corresponding period of the previous year.

Reacting on the monthly data, director general of the Confederation of Indian Industry Chandrajit Banerjee said the RBI should "revisit its monetary policy stance and cut its policy rates to rejuvenate growth in the industry which has been hit by high interest costs and flagging investment."

President of industry body FICCI Sidharth Birla expressed hope that inflation would ease further in the coming months.

"Both WPI and CPI have eased considerably in the past two months. With good sowing in the rabi season it is expected that inflation will maintain its downward trajectory going forward," Birla said.

Birla also urged the central bank to lower policy rates, in a bid to support economic growth.

"Weak demand continues to be of the biggest concern for industry. Discretionary spending has taken a hit due to lower disposable incomes, in part also owing to high interest rates. Advance estimates for private consumption indicate a growth of 4 percent in 2013-14, which is the lowest in about eleven years," said Birla.

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