Inflation falls to two-year low of 7.47 percent

New Delhi : On the back of decline in the prices of food products, India’s annual inflation based on the wholesale price index fell to a two-year low of 7.47 percent in December as compared to 9.11 percent in the previous month, official data showed Monday.

Inflation has declined sharply after remaining stubbornly near double-digit for the last two years offering the much needed relief to the common people and the policymakers.

Inflation was at 9.45 percent during the corresponding month of 2010, according to data released by the ministry of commerce and industry.

Reacting to the monthly data, Finance Minister Pranab Mukherjee said inflation would continue to moderate in the coming months and it would be in the range of 6-7 percent by March.

“Alongwith the IIP numbers for November 2011, the recent headline inflation figures indicate some improvement in the overall macro-economic parameters in the second half of 2011-12,” Mukherjee said.

Factory output, measured in terms of the Index of Industrial Production (IIP), rose by 5.9 percent in November against 4.74 percent contraction in the previous month on the back of a significant rebound in manufacturing activities, according to official data released last week.

Easing inflationary pressure and rebound in factory output will give the Reserve Bank of India room to keep a pause on the rate action when it reviews its monetary policy next week.

The RBI last month kept policy rates unchanged after hiking the key rates 13 times since the beginning of 2010.

The build up inflation in the financial year 2011-12 till December was 4.95 percent compared to a build up of 7.12 percent in the corresponding period of the previous year.

The primary articles inflation fell to 3.07 percent while food inflation dropped to 0.47 percent. Several food items including onions, potatoes and other vegetables and wheat became cheaper year-on-year.

In fact, the food inflation was in the negative zone in the last two weeks of December.

Annual food inflation was recorded at minus 2.9 percent for the week ended Dec 31 and minus 3.36 percent in the previous week, which was the lowest since April 2006.

However, inflation in manufactured goods remain on an elevated level. Manufactured products, having 64.97 percent weight in the wholesale price index, registered price rise of 7.41 percent in December year-on-year.

The finance minister said high inflation in manufactured products continued to remain a “cause of concern”.

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