Inflation falls to 11-month low at 7.48%, RBI may halt rate hikes

Easing food prices pulled down the inflation to 11-month low of 7.48 per cent in November, raising hopes that the Reserve Bank (RBI) will not go for a hike in key rates in its monetary policy review on Thursday.

The fall in inflation prompted Finance Minister Pranab Mukherjee to express hope that it will come down to around 6 per cent by this fiscal-end. The Reserve Bank has pegged it at 5.5 per cent by March.

"I am hoping it (inflation) to be around 6 per cent by March," Finance Minister Pranab Mukherjee told reporters here. He said after quite some time food inflation has become "very moderate".

The last time inflation was below 8 per cent was in December 2009 when it stood at 7.31 per cent.

Planning Commission Deputy Chairman Montek Singh Ahluwalia said "inflation is comfortable. I think it does vindicate the government's proposition that we are not facing an accelerating inflation or inflation that is out control".

According to data released today, prices of most food items declined or changed very little. However, onion was an exception since it turned expensive by as much as 29.35 per cent, as its crop was damaged by unseasonal rains in parts of Maharashtra, particularly Latur, the biggest producer. 

Fruit prices were also up 3.61 per cent. Prices of manufactured items also moved in a narrow range.

This is the fourth consecutive month when the overall inflation has been in the single digit. It had remained over 10 per cent for six months till July.  

The latest figure bears out the projection of Chief Economic Advisor Kaushik Basu who had earlier this month said that inflation in November will be down to 7.5 per cent.

Inflation was at 4.50 per cent in the same month last year. It had stood at 8.58 per cent in October. Leading economists are also hopeful that inflation would be around 6 per cent this fiscal-end.

"To us, the 6 per cent target set by government looks likely to be achievable. You must see that inflation is low despite having a low numbers last year," said Crisil Chief Economist D K Joshi, referring to the 4.50 per cent inflation during the corresponding month of 2009.

He said that inflation will remain low in the next few months, though there may be minor hiccups.

"The fall is in line with our expectations and we believe that inflation will remain moderate till at least May next year," Axis Bank Senior Vice President Saugata Bhattacharya said.