Inflation declined to 7.24 percent in November mainly on account of lower prices of some vegetables, giving a cue to RBI to consider interest rate cut next week to promote sagging growth.
Vegetables prices decreased by 1.19 percent in November this year as compared to surge of 10.68 percent in same month a year ago.
Inflation, as measured by the Wholesale Price Index (WPI), came down to 7.24 percent in November from 9.46 percent in the 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.
Inflation, as measured by the Wholesale Price Index (WPI), stood at 7.45 percent in the previous month.
“It is a welcome trend if inflation rate has come down… We should work towards more comfortable level of inflation which is 5-6 percent,” 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”.
“The time has come to recognise that inflation is clearly softening and growth is weak and I am sure that RBI knows what to do”, he added.
Yesterday RBI Deputy Governor K C Chakrabarty said cutting the repo rate (at which RBI lends to banks) will be possible only when inflation comes down. However, he expected inflation to come down in about 2-3 months.
Meanwhile, retail inflation in November moved up to 9.90 percent, mainly on account of higher prices of sugar, vegetables, edible oil and clothing.
Chief Economist, HDFC Bank said inflation in November is much lower than what economists had expected and this should also encourage the RBI for more monetary expansion.
Chief Economist, Kotak Mahindra Bank Indranil Pan, said that Inflation data is positive but for RBI to react, the retail inflation needs to come down.
“On December 18 policy of RBI, we are expecting only CRR cut to happen. We expect a cut by 25 basis points in the CRR. Rate change is expected only in January,” he added.
Food inflation, as a category in the WPI, rose to 8.5 percent during the month, from 8.32 percent a year ago. Food articles have 14.3 percent share in the WPI basket.
Though vegetables in general registered a decline, Potato and onion prices, however, shot up by 72.20 percent and 17 percent respectively year on year in November this year.
This is compared to a decline of 9.31 percent and 35.15 percent in the same period last year.
Wheat turned expensive by 23.19 percent in November from a decline of 4.86 percent in the same month a year ago. Cereals became dearer by 15.85 percent from a rise of 2.15 percent in the same month last year.
Pulses and eggs, meat and fish became costlier by 19.10 percent and 14.19 percent in November. These food items also saw a price surge by 14.96 percent and 11.40 percent respectively in November last year.
For the fuel and power category, inflation moderated to 10.02 percent during the month from 15.48 percent in November 2011. However, diesel inflation increased by 14.60 percent last month.
In the manufactured items category, prices of cotton textiles, man-made textile, iron and steel, paper products besides rubber and plastic products rose relatively at a lower pace compared to the same month of the previous year.
The rate of price rise in the manufactured products was 5.41 percent in November, as against 8.17 percent in the corresponding month of last year.