Near zero inflation in December raises rate cut demands

WPI based inflation moved up marginally in Dec to 0.11% from zero level in November, reversing the six month declining trend

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Declining prices of global crude oil kept the inflation rate at near zero level in December, raising the clamour for interest rate cut by RBI to boost domestic manufacturing and spur economic growth.

Wholesale price index (WPI) based inflation moved up marginally in December to 0.11% from zero level in November, reversing the six month declining trend.

The slight increase in inflation rate was due to spurt in 'food items' basket. Food inflation in December moved to 5-month high of 5.2%, as per the government data released today.

While inflation in pulses, vegetables and fruits was higher in December over the previous month, it eased in wheat, milk and other protein rich items like egg, meat and fish.

"To give a boost to the capex cycle, there is an urgent need for lowering of lending rates. Since the inflation is largely under control, we urge the RBI to ease the monetary policy stance," industry body Ficci's President Jyotsna Suri said.

The data showed inflation in fuel and power segment contracted sharply by 7.82%, as against 4.91% in November.

The Reserve Bank, which has kept key interest (repo) rate unchanged at 8%, is scheduled to announce its next monetary policy on February 3.

Global oil prices have slumped to near 6-year low of around USD 46 a barrel helping importing countries like India to cut back on their dollar payments as well as ease retail prices, which in turn calm inflation.

The retail inflation measured on consumer price index (CPI) for December too had inched up to 5% while it was 4.38% in November.

The data further revealed that the inflation in the primary articles segment shot up to 2.17% in December, as against a decline of 0.98% in November.