Inflation fell below nine per cent for the first time in 12 months as it stood at a two-year low of 7.47 per cent in December, mainly due to a steep fall in the rate of price rise in food items.
However, India Inc may have to wait longer to see rates cut by the Reserve Bank as inflation in manufactured products was high despite some moderation. Disappointed at the slow pace of decline in the rate of price rise in manufactured products, Finance Minister Pranab Mukherjee said the headline inflation numbers might fall further with some corrective policy measures. Manufactured inflation, along with that in fuel and power, is still a worry. “Manufactured inflation and inflation in the power group of items have also declined, though only marginally. Therefore, they continue to be a cause of concern,” he said.
The wholesale price index for manufactured items showed a 0.57 per cent rise month-on-month. Core inflation (inflation in manufactured products sans the processed food category) declined from 7.96 per cent in November to 7.72 per cent in December, but remained elevated. In fact, core inflation also rose 0.52 per cent month-on-month, making it the fourth consecutive month of significant gains, an analysis by YES Bank said. “The Reserve Bank, while framing its monetary policy, will have to take into account not only the decline in food inflation and headline inflation, but also factor in the manufactured inflation,” Prime Minister’s Economic Advisory Council Chairman C Rangarajan was quoted as saying by the Press Trust of India.
Planning Commission Deputy Chairman Montek Singh Ahluwalia said, “Where people were saying inflation was a big problem and required monetary tightening, now the RBI will have more flexibility to stimulate GDP growth.”
Indian economic growth fell to a nine-quarter low of 6.9 per cent in July-September, 2011-12.