India's wholesale inflation drops to 5-year low

India's annual wholesale inflation rate dropped to its lowest level in five years to 1.77 percent in October from 2.38 percent in the previous month and 7.24 percent for the like month of the previous year, official data showed Friday.

In what has come as a major respite for an average consumer, the annual food inflation actually declined by 1.3 percent due to a drop in the prices of fruits and vegetables, some lentils and coarse cereals. But prices of fish, eggs, mutton moved up.

Similarly, as per data on official wholesale price index released by the government, the index for fuel and power also declined by 1.3 percent, due to lower prices of aviation fuel, petrol, diesel and kerosene.

The index for manufactured products remained unchanged.

The drop in wholesale inflation, along with a fall in the retail index and the rise in factory output reported earlier this week, are some welcome signs for the Reserve Bank of India to consider an interest rate cut to push growth.

The Confederation of Indian Industry (CII) welcomed the fall in headline inflation on account of an across the board drop in food, fuel and manufacturing goods' prices.

"Going forward, the deceleration in global commodity prices as also the government's firm commitment to keep inflation under check would help rein in inflationary expectations and significantly reduce the upside risks to inflation," CII said in a statement.

"This provides 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", said Chandrajit Banerjee, director general, CII.

Industry chamber FICCI said the considerable softening in prices comes as a great relief.

"The government is committed towards achieving fiscal consolidation and this along with alleviated inflation creates room for a more accommodative stance from the central bank in terms of rate reduction in the policy to be announced next month", said A. Didar Singh, secretary general, FICCI.