Inflation declined for the second consecutive month to 8.58 per cent in October, with price pressure mostly confined to food items.
Inflation stood at 8.62 per cent in September. The fall in inflation in October is significant, since the base was quite low a year ago at 1.48 per cent.
While food inflation was at the elevated level of 14.13 per cent, despite moderation from 15.71 per cent in the previous month, inflation on manufactured items stood at a comfortable 4.75 per cent. However, this was still higher than the 4.59 per cent inflation on manufactured items witnessed in September.
Manufactured items have the highest weight of 64.9 per cent in the wholesale price index, on the basis of which inflation is calculated.
Most food product prices either declined or showed moderate increases in October, but onion rates shot up by 24.07 per cent during the month, as crops in parts of Maharashtra were damaged due to torrential rains.
In the wake of 16-month-low industrial growth at 4.4 per cent in September, declining inflation may prompt the RBI to relax its monetary tightening drive.
Enthused by the figures, Prime Minister's Economic Advisory Council Chairman C Rangarajan said, "We hope it will come down to 6.5 per cent by December-end and something close to 5.5 per cent by March, 2011."