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Inflation falls to two-year low in December

Monday January 16, 2012 07:50:17 PM, IANS

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New Delhi: India's annual inflation rate fell to a two-year low of 7.47 percent in December, offering relief to policy-makers ahead of crucial state elections.

The inflation, based on the wholesale price index (WPI), was 9.11 percent in the previous month on the back of easing food prices.

It was at 9.45 percent during the corresponding month of 2010.

Seeing the data released by the commerce and industry ministry Monday, Finance Minister Pranab Mukherjee said inflation would continue to moderate in the coming months and it would be in the range of 6-7 percent by March.

"Along with the IIP numbers for November 2011, the recent headline inflation figures indicate some improvement in the overall macro-economic parameters in the second half of 2011-12," Mukherjee said.

Inflation had remained stubbornly near double-digit for the last two years.

The easing in inflationary pressure and a rebound in factory output in November, it is hoped, will give the Reserve Bank of India to cut interest rate when it reviews monetary policy Jan 24.

The RBI last month kept policy rates unchanged after hiking the key rates 13 times since the beginning of 2010.

However, the general inflation is still much above the central bank's comfort level of 4-5 percent.

The build up inflation in the financial year 2011-12 till December was 4.95 percent compared to a build up of 7.12 percent in the corresponding period of the previous year.

The primary articles inflation fell to 3.07 percent while food inflation dropped to 0.47 percent. Several food items including onions, potatoes and other vegetables and wheat became cheaper year-on-year.

In fact, the food inflation was in the negative zone in the last two weeks of December.

Annual food inflation was recorded at minus 2.9 percent for the week ended Dec 31 and minus 3.36 percent in the previous week, which was the lowest since April 2006.

However, inflation in manufactured goods remain on an elevated level. Manufactured products, having 64.97 percent weight in the WPI, registered a price rise of 7.41 percent in December year-on-year.

The finance minister said high inflation in manufactured products continued to remain a "cause of concern" but hoped
that it would ease in the coming months.

"Moderation in inflation would continue in the coming months though softening in the prices of manufactured goods despite the rapid decline in non-food primary inflation may be more gradual," he said.




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