India's WPI inflation slows to 5-year low

Wednesday 10th December 2014 06:03 EST

India's wholesale price inflation slowed to a 5-year low in October on the back of cooling food and fuel prices, triggering expectations of a cut in interest rates. The latest data comes close on the heels of numbers which showed retail inflation slowing to a fresh low of 5.5% in October, largely due to moderating food and fuel prices. The sharp moderation in price pressures, evident from the two data sets, piles enormous pressure on the Reserve Bank of India to cut interest rates to boost growth.
The annual rate of inflation, based on the monthly wholesale price index, stood at 1.8% in October compared to 2.4% for the previous month and 7.2% during the corresponding month of the previous year, data released by the commerce ministry showed. The October number was the slowest pace of inflation since September 2009.
The RBI has so far resisted calls for a reduction in interest rates, citing stubborn inflationary pressures and would prefer to see more evidence before it is convinced to move on rates. It relies more on retail inflation than the WPI inflation. It will review monetary policy on December 2.
Finance minister Arun Jaitley said he expects the moderation in global crude prices to have a positive impact on prices. “We believe that softening of prices is in our interest. With crude prices down, this trend of lower food prices will continue,” Jaitley told reporters.
India Inc has been stepping up the pressure to cut rates which, it says, is critical to boost investment and help revive growth.

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