Inflation dips to 10-mth low of 7.24%,raises hopes of rate cut

The declining trend might trigger an interest rate cut by RBI to boost economic growth which fell to 5.4 per cent in first half of the current fiscal from 7.3 per cent in the year ago period.

The decline in inflation during November from 7.45 per cent a month ago and 9.46 per cent in the corresponding month a year ago can be attributed to falling prices of certain vegetables.

Encouraged by falling inflation, Chidambaram expressed the confidence that it would moderate further in the next two to three months.

"Inflation is a challenge. 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", he said during a discussion in Parliament.

Vegetables prices decreased by 1.19 per cent in November this year as compared to surge of 10.68 per cent in same month a year ago.

However, prices of some food items like potato, wheat, cereals, rice, pulses, edible oil and sugar went up during the period.

"It is a welcome trend if inflation rate has come down... We should work towards more comfortable level of inflation which is 5-6 per cent," Prime Minister's Economic Advisory Council Chairman C Rangarajan said.

Planning Commission Deputy Chairman Montek Singh Ahluwalia termed moderation in inflation as a "very good signal". (MORE)