India’s wholesale inflation rate eased to a nine-month low of 4.68% in February from 5.05% in the previous month due to plunging vegetable prices, giving the UPA government a reason to smile ahead of the national elections that begin next month.
January’s inflation rate is the slowest since May 2013, when wholesale prices rose 4.58%.
Retail inflation — a more realistic index as it captures shop-end prices — eased to a two-year low of 8.10% in January from 8.79% in the previous month.
Wholesale food inflation slowed to 8.12% in February from 8.80% in January, while vegetable inflation fell to 3.99% in February from 16.6% in the previous month. Manufactured product inflation, however, remained flat at an identical 2.76% in both January and February.Read: Rangarajan says 5.2% growth in Q4 achievable
Non-food, non-fuel inflation or what is called core retail inflation — a more closely watched index as it captures shop-end prices of industrial goods — edged up to 3.15% in February from 3% in the previous month implying that prices continues to remain in worrisome zone.
The Reserve Bank of India (RBI) has raised lending rate three times in the last six months to tame inflation by cooling demand. This has raised home loan EMIs.
India’s business leaders have been demanding a cut in interest rates to spur investments.
“The moderation in inflation should induce the RBI to make a shift towards a more accommodative monetary policy stance to revive investment and propel demand,” said Chandrajit Banerjee, director-general, CII.
Industrial output, however, crawled at 0.1% in January from a contraction of 0.2% in December. The manufacturing sector fell by 0.7% in January.
Economists do not expect the RBI to slash lending rates in its next monetary policy review on April 1, despite the moderation in overall inflation rates.
"Given any lack of significant drops in core WPI and core CPI inflation, we do not expect any change in stance from the RBI," said Indranil Pan, chief economist, Kotak Mahindra Bank.