Inflation eases to 3-yr low of 6.62 pc in Jan; veggies costly

Inflation plummeted to a three year low of 6.62 per cent in January, but gave no respite to common man as prices of essential kitchen items like onion and potato continued to rule high.

The inflation rate, measured by movement in wholesale prices, moderated for the fourth consecutive month in January mainly on account of lower price rise of manufactured goods.

The WPI inflation was 7.18 per cent in December and 7.24 per cent in November. It was 7.23 per cent in January, 2012. Food and primary articles have shown higher annual price rise, led by onion (111.52 per cent) and potato (79.07 per cent). Besides wheat, vegetables, rice and cereals too became dearer.

Commenting on the inflation numbers, Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan said it would further decline to 6.5 per cent by March end, but asked the government to release more food stock to ease price situation.

"Retail inflation is still high. WPI inflation in primary and food articles are still at higher levels. Efforts should be made to release larger stocks of food articles in the market," Rangarajan said.

Retail inflation stood at 10.79 per cent in January mainly on account of higher prices of vegetables, edible oil, cereals and protein-based items. As per official data, inflation in manufactured items category fell 4.81 per cent in January from a year earlier, compared with an annual rise 5.04 per cent in December.

Inflation in food items and primary articles category was at 11.88 per cent and 10.31 per cent respectively in January. Fuel prices rose 7.06 per cent in January, compared to 9.38 per cent in December. A likely increase in prices of diesel and petrol will reflect in February inflation number, which will be available next month.

Commenting on inflation, Planning Commission Deputy Chairman Montek Singh Ahluwalia said: "Inflation is still above the comfort level and it should come down further".

Easing of inflation would provide much needed space to the Reserve Bank to lower policy rates going ahead. The RBI had projected March end inflation to be 6.8 per cent.

Although it is still above RBI's comfort zone of 5-6 per cent, the declining in the January inflation and subdued growth in industrial output could prompt a rate cut going forward.

Industry chamber CII said there was a need to address the supply side bottlenecks to increase availability of food stocks.

"The declining trajectory of both headline and core inflation has created sufficient room for RBI to cut its policy rates by 50 basis points in its review of monetary policy in March," CII Director General Chandrajit Banerjee.

The RBI is scheduled to come out with mid-quarter policy review on March 19.
"The mild moderation in core inflation, combined with the weaker-than-expected industrial performance in December 2012, boosts the likelihood of monetary easing in mid-quarter policy review in March," ICRA Senior Economist Aditi Nayar said.

The central bank had last month lowered interest rates by 0.25 per cent saying that with inflation showing signs of remaining range bound, it was now critical to arrest the loss of growth momentum.

According to the advance estimates of Central Statistical Organisation (CSO), the GDP growth in the current fiscal is likely to be 5 per cent. However, the government expects it to be over 5.5 per cent. The economy grew by 6.2 per cent in 2011-12 fiscal.