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Inflation declines to 7.45% in Oct; slowest in 8 months

Inflation declined marginally to 7.45 percent in October even though prices of food items like rice, wheat pulses and potato showed a rise.

New Delhi: Inflation declined marginally to 7.45 percent in October even though prices of food items like rice, wheat pulses and potato showed a rise giving virtually no respite to the common man battling price rise.

Inflation, as measured by the Wholesale Price Index (WPI), was 7.81 percent in September. In October last year, it stood at a high of 9.87 percent.

However, the moderation in the price rise comes amidst a string of disappointing economic data released on Monday. These included contraction in industrial output, and decline in exports along with rise in retail inflation which dampened hopes of early economic revival.

Experts believe that stubborn inflation may not prompt the Reserve Bank to reduce lending rate in the upcoming mid-quarter review of the monetary policy on December 18.

"Inflation is still sticky at above 7 percent. This does not provide sufficient comfort for the RBI to lower the interest rate," said Rajiv Kumar, economist and former director of the Indian Council for Research on International Economic Relations (ICRIER).

There is still need to improve the supply side problems, he said.

India Inc is of the view that the decline in the rate of price rise should encourage RBI to cut interest rate that will lead to uptick in industrial activity.

"The inflation numbers are showing signs of moderation with figure coming down from 8 percent in August 2012 to 7.81 percent in September 2012 and further down to 7.45 percent in October 2012. This should encourage RBI to fine tune the monetary policy with the view to bolster growth, particularly, that of the manufacturing sector," Ficci President R V Kanoria said.

Bank of Baroda chief economist Rupa Rege Nitsure, however, said the Reserve Bank may wait till the headline inflation falls by 100 basis points more.

During its half-yearly monetary policy last month, the Reserve Bank had kept benchmark interest rate unchanged on concerns of persistent inflation.

Food inflation, as a category, declined to 6.62 percent during the month, from 7.86 percent in the previous month. Food articles have 14.3 percent share in the WPI basket.

While wheat turned expensive by 19.78 percent from 18.63 percent in September, cereals became dearer by 14.35 percent from 14.18 percent during the period.

On year-on-year basis, potatoes were costlier by 49.13 percent, pulses by 20 percent and rice by 11.40 percent.

However, vegetables prices declined by 7.45 percent with onion falling by 8.99 percent on an annual basis during the reported month.

For the fuel and power category, inflation moderated to 11.71 percent from 11.88 percent.

In the manufactured items category, prices of cotton textiles, man-made textile, iron and steel paper and paper products, rubber and plastic products rose relatively at a slower pace compared to the same month of the previous year.

The rate of price rise in the manufactured products was 5.95 percent in October, as against 6.26 percent in the previous month.

Inflation for August was revised upwards to 8.01 percent from 7.55 percent as per provisional estimates.

Retail inflation in October moved closer to the double digit mark at 9.75 percent. This was on account of rising prices of food items such as sugar, pulses, vegetables besides clothing.

Consumer Price Index (CPI) stood at 9.73 percent in September.


From Zee News

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