Expert views: Jan inflation eases to 6.62 percent

MUMBAI (Reuters) - The annual wholesale price inflation slowed to 6.62 percent in January, government data showed on Thursday, below than 7 percent expected in a Reuters poll of economists.

COMMENTARY

A PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY SECURITIES DEALERSHIP, MUMBAI

"This shows that finally inflation is easing and fits with the growth slowdown. I think March inflation will be lower than RBI's projection and that should give RBI the comfort to cut rates by 25 basis points in March. Also, the revision trends are softening and so there could be a marginal upward revision if at all, to the January number. This number will strengthen the rate cut expectations going ahead."

BACKGROUND

- Annual consumer price inflation accelerated to 10.79 percent in January from the previous month, government data showed on Tuesday, making retail inflation in India the highest among the BRICS group of emerging economies - Brazil, Russia, China, and South Africa.

- Trade deficit rose to $20 billion in January from $17.7 billion in the previous month as imports surged while exports rose only slightly, adding pressure to a widening current account deficit and limiting the scope for further interest rate cuts by the central bank.

- Current account deficit is likely to reach a record high in 2012/13, the RBI governor warned, a gap which the bank said previously needed to shrink for it to lower borrowing costs.

- Industrial production unexpectedly shrank for a second straight month in December, weighed down by weak investment and consumer demand, casting doubt on Finance Minister P. Chidambaram's view that Asia's-third largest economy is showing signs of recovery.

- Investment malaise is thwarting quick economic rebound and India is on course to end the 2012/13 fiscal year in March with its slowest growth in a decade at 5.0 percent.

- The RBI lowered its key policy rate for the first time in nine months in January, but struck a cautious note on further easing as it waits to see how the government's upcoming budget aims to bring a bloated fiscal deficit under control.

(Reporting by India Treasury, Equities and Markets teams; Editing by Ranjit Gangadharan)