More cheer as inflation cools to 5-year low

  • HT Correspondent, Hindustan Times, New Delhi
  • Updated: Nov 15, 2014 01:27 IST

India’s wholesale inflation rate plunged to five year low of 1.77% in October, aided by a sharp drop in vegetable prices, data released Friday showed, intensifying pressures on the RBI to cut interest rates leading to lower EMIs.

The nearly one percentage point drop in wholesale inflation rates over September’s 2.38%, should bring cheer to the NDA government that rode to a landslide election victory promising to bring down prices of essentials as part of its poll pledge to usher in `Aachen din’ (Good days).

It was also the lowest since 1.40% of September 2009, a period when demand for goods fell sharply battered by the worst global recession in 80 years.

Besides, with crude oil prices continuing to plunge, expect retail diesel prices to come down further.

Friday’s data is expected to strengthen the outlook for Indian economy -- third largest in Asia-- recovering from a two-year spell of sub-5% growth. Data released two days ago showed that India’s retail inflation fell to a three-year low of 5.52% in October and factory output rebounded to 2.5% in September.

Wholesale food inflation, a measure of how costly the platter has become, grew 2.70% in October form September’s 3.52%. Wholesale vegetable prices fell 19.61% in October on a year-on-year basis, while onion prices plunged 59.77%.

`Manufactured products inflation’—a broad index to gauge price movements of industrial goods—was lower at 2.43% in October compared to August’s 2.84%, but still higher than last September’s 2.36%.

Business leaders called for an interest rate cut by the RBI in its monetary policy next month.

“This (low inflation rates) provide sufficient room to the RBI to review its prolonged pause in policy rates and move towards policy easing in its forthcoming monetary policy especially as investment and consumption demand are yet to show visible signs of a pick-up”, Chandrajit Banerjee, Director General, Confederation of Indian Industry (CII).

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