India’s headline inflation slowed to the lowest level in more than two years in January to 6.55 per cent, enabled by a high base and cheaper food items, although the relative stickiness of manufactured goods prices continued to be a cause for concern. Finance minister Prana
b Mukherjee said inflation would continue to decline and stand closer to 6 per cent in March, although the softening of manufactured goods prices might be more gradual. Analysts say the Reserve Bank of India will likely wait until April to ease interest rates. The Q3 GDP data, expected on February 28, and how the government plans to handle the fisc in the Budget will also be factors the RBI will weigh before taking a call on when to start cutting rates. Wholesale price-based inflation rose at its slowest gain since November 2009 in January, as compared to 7.47 per cent increase in December, official data showed Tuesday. Headline inflation was 9.47 per cent in January last year. The cooling of inflation is the latest in the series of good news for the economy after the manufacturing sector grew at its fastest pace in eight months in January while the services sector expanded most in six months.
Food inflation fell 0.52 per cent in January from a 0.74 per cent rise in December as vegetable supplies remained steady, while manufactured items index gained 6.49 per cent, compared with 7.41 per cent in the previous month. Food articles have a 14.3 per cent weight in the WPI basket while manufactured items account for 65 per cent. Fuel and power inflation rose 14.21 per cent from a year before, compared with 14.91 per cent in December. Primary articles index rose 2.25 per cent in January, compared with 3.07 per cent in December.
