Headline inflation fell to a 10-month low of 7.24 per cent in November, from 7.45 per cent in the previous month, fuelling hopes of a rate cut by the Reserve Bank of India (RBI).
This is the last crucial data before the central bank’s monetary policy review on December 18. A rate cut by RBI would boost economic growth, languishing below six per cent for three quarters in a row till July-September 2012-13.
Economists, however, said RBI will maintain a status quo on the rate front on December 18.
YES Bank Chief Economist Shubhada Rao said: “We expect RBI to maintain status quo in its mid-quarter review on December 18, though it is likely to acknowledge the early moderation in price pressures.”
Core inflation (manufactured products without food items), which many consider a key part of the rate of price rise for RBI to take a call on the policy rate, plunged to a 32-month low at 4.49 per cent in November, versus 5.19 per cent in the previous month.
World Bank chief economist Kaushik Basu said, “Food inflation was as high as over 20 per cent in early 2010 and now it is just short of 10 per cent. So, it is the non-volatile sector, which is core inflation, that is beginning to come down.”
He, however, advised caution, given that inflation had been at a reasonably high level from November 2009. “One can be cautiously optimistic.”
Finance Minister P Chidambaram said: “Inflation worries the government. While CPI inflation is sticky, good news is that WPI inflation seems to be trending downwards. If it trends downwards, there will be some reason for comfort.”
Prices of food items rose to a three-month high of 8.50 per cent from 6.62 per cent over the same period last year. Fuel price inflation came down to 10.02 per cent in November from 11.71 per cent. Wholesale-price inflation in manufactured products declined to a five-month low of 5.41 per cent from 5.95 per cent.
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This, as the industry is still struggling with sluggish demand