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Inflation cools off to 7.45% in Oct

New Delhi, Nov 14, 2012,DHNS 22:00 IST

May prompt RBI to resort to rate cut

 Labourers thresh paddy crop in a farm at Sanand in Gujarat October 30, 2012. REUTERS
India’s wholesale inflation slowed marginally to 7.45 per cent in October, taking some pressure away from the Reserve Bank of India, but expensive food required augmentation of supply-side measures from the government.

The Wholesale Price Index (WPI) at 7.45 per cent was down from 7.81 per cent in September, government data showed on Wednesday. The lower inflation print may prompt the RBI, already being pressured from the government and industry groups, to resort to a rate cut in its monetary policy review early next year.

But, experts were still apprehensive about any cooling-off of inflation in coming months as the recent rise in diesel prices is only expected to fan fuel prices having a secondary effect on core inflation and maintaining the upward pressure on WPI index in this financial year.
Although the overall food inflation declined to 6.62 per cent in October from 7.86 per cent last month, prices of wheat went up close to 20 per cent from less than 19 per cent last month. Pulses and rice too showed an upward movement in prices along with potatoes. But, seasonal vegetables, especially onion prices cooled-off on expectation of good crop arrival in the market this season. The fuel and power inflation was lesser at 11.71 per cent from close to 12 per cent previous month.

The inflation print could not evoke any reaction from the stock or bond prices as the share market remained closed on account of a public holiday. But, Ficci expected RBI to revisit its monetary policy regime on account of moderation in inflation number.

“The inflation numbers are showing signs of moderation,” said Ficci President R V Kanoria.
“This should encourage RBI to fine-tune monetary policy with a view to bolstering growth, particularly in the manufacturing sector.”

The WPI has averaged 7.60 per cent since December 2011, despite RBI’s tight monetary stance. Sustained rise in prices of agricultural commodities and rising rural consumption has added to inflation.

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