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Inflation At 2-year Low Of 7.47% In Dec

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Headline inflation fell to a two-year low of 7.47 per cent in December 2011 on cheaper food items, a factor which may prompt the Reserve Bank of India (RBI) to cut policy rates in the upcoming review.

Headline inflation, as measured by Wholesale Price Index (WPI), had stood at 9.11 per cent in November. It was 9.45 per cent in the same month of 2010.

The latest numbers are the lowest since December 2009 when headline inflation was at 7.15 per cent.

As per the official data released on Monday, vegetables were cheaper by 34.18 per cent and wheat by 3.81 per cent on an annual basis. Potato and onion prices also fell by 35.45 per cent and 60.45 per cent year-on-year during December.

Prices of food items rose at a lower rate of 0.74 per in December, compared to 8.54 per cent expansion in the previous month.

Food articles have a 14.3 per cent share in the WPI basket and experts attributed the moderation in inflation to cheaper food articles.

Inflation in overall primary articles stood at 3.07 per cent in December, compared to 8.53 per cent in November.

Non-food primary articles, which include fibres and oil seeds also showed moderation by registering an inflation of 1.48 per cent in December, compared to 3.22 per cent rise in the previous month.

However, inflationary pressure continued in manufactured items, which which have a weight of around 65 per cent in the WPI basket.

Prices of manufactured products, went up by 7.41 per cent year-on-year in December, as against 7.70 per cent in the previous month.

Inflation Down To 6-7% By March
Encouraged by a sharp dip in December inflation, Finance Minister Pranab Mukherjee Monday said the declining rate of price rise indicates improvement in macro-economic parameters and projected March-end numbers at 6-7 per cent.

The decline in the December inflation, he said, is "mainly due to significant decline in inflation for primary articles, including food inflation."

Mukherjee said good industrial production numbers for November at 5.9 per cent and a sharp decline in inflation "indicates some improvement in the overall macro-economic parameters in the second half of 2011-12."

"This trend is likely to consolidate in the coming months with some policy correctives," Mukherjee added.

Prices of manufactured products, which account for 65 per cent in the WPI basket, went up by 7.41 per cent year-on-year in December, as against 7.70 per cent in the previous month.

"The manufactured inflation and inflation in the power group of items ... continued to be a cause of concern," Mukherjee said.

He added that the softening in prices of manufactured goods would be gradual, even as non-food primary inflation is witnessing rapid decline.