Inflation falls to 6.62 percent, lowest in over three years

New Delhi, Feb 14 (IANS) India's wholesale price based inflation fell to 6.62 percent in January, its lowest level in over three years, helped by slower rise in prices of fuel and manufactured items, government data showed Thursday.

The wholesale price index (WPI) based inflation, the country's main indicator of price movement, had increased by 7.18 percent in the previous month and 7.23 percent in January last year.

The build-up inflation in the first 10 months of the current financial year was 5.09 percent as compared to 6.15 percent in the corresponding period of previous year, according to data released by the commerce and industry ministry.

Manufactured goods inflation dropped to 4.81 percent in January as compared to 5.04 percent recorded in the previous month.

Fuel and power inflation eased to 7.06 percent in the month under review as compared to 9.38 percent in December.

However, food inflation remained at an elevated level. It remained in double-digit at 11.88 percent in January as compared to 11.16 percent in the previous month.

Reacting on the monthly data, Planning Commission Deputy Chairman Montek Singh Ahluwalia said the inflationary pressure would moderate gradually.

"This clearly indicates that inflation is coming down slowly," said Ahluwalia, adding that inflation still remained above the comfort level.

January inflation level of 6.62 percent is the lowest since November 2009.

Food inflation, which affects the common people most, increased in January due to more than doubling in prices of onion and sharp increase in prices of potato and other vegetables and cereals.

Onion price increased by 111.52 percent in January year-on-year. Potato became costlier by 79.07 percent. Overall vegetables prices increased by 28.45 percent year-on-year.

"The rise in food inflation calls for urgent measures to address supply side bottlenecks by delisting perishables from Agricultural Produce Marketing Act and augmenting investment in agri-infrastructure which would improve the productivity of agriculture and lead to a further decline in inflation," Chandrajit Banerjee, director general, Confederation of Indian Industry (CII).

According to data released by the Central Statistics Office (CSO) earlier this week, inflation based on consumer price index was recorded at 10.79 percent in January.

Rajkumar Dhoot, president, Associated Chambers of Commerce and Industry (Assocham), emphasised the need for lowering interest rates by the Reserve Bank of India in view of the favourable inflation numbers.

"Industry now look forward towards RBI to take a re-look in further reducing the key policy rates to restore the growth momentum which has suffered due to elevated inflation," Dhoot said.

"The headline inflation number in January 2013 has positively moderated for the fourth straight month. Core inflation too has stabilised well within the RBI's comfort level and that is likely to give some respite to the high interest rate environment," said Bhupali Gursale, economist at Angel broking.

Gursale said the central bank is likely to cut interest rates by 0.25 percent in the March or April policy review.

"We do expect a 25 basis points rate cut in the March or April policy, maintaining our view of a 75 basis points rate cut for the rest of the year. At the same time though release of suppressed inflation in the economy going ahead and the twin deficits - fiscal and current account deficits are likely to limit any aggressive easing," Gursale said.

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