India's inflation fell to a five-month low in December, data showed Wednesday, providing rare cheer to the government ahead of elections and easing pressure on the central bank to hike rates.
The scandal-tainted Congress-led government of Prime Minister Manmohan Singh is desperate to tame inflation and revive the economy as it seeks a third term in office after national elections due by May.
Wholesale Price Inflation -- the most widely watched price barometer -- fell to 6.16 percent in December from a year earlier, down sharply from 7.52 percent the previous month.
The decline surprised analysts who had forecast around seven percent.
The latest figures come after the government announced retail inflation -- compiled using a narrower basket of goods -- fell to a three-month low of 9.87 percent in December.
With industrial output shrinking 2.1 percent in November, the worst performance in six months, business has been clamouring for a cut in lending rates to help boost growth.
The Reserve Bank of India kept its benchmark policy rate unchanged at 7.75 percent last month hoping that inflation would ease as last year's bountiful monsoon lowered food prices.
But inflation is still beyond the bank's comfort zone of around five percent despite rate hikes in both September and October.
For a cut to happen, the bank "would probably need to see inflation meaningfully lower than it is now," said Credit Suisse analyst Robert Prior-Wandesforde.
The central bank is slated to review interest rates at a quarterly monetary policy review meeting on January 28.
A main driver of inflation last month remained food prices, which rose a still hefty 13.68 percent year-on-year.
The cost of onions, regarded as a cooking essential, jumped 40 percent -- but that was down from a massive 322 percent year-on-year rise last October.
Date created : 2014-01-15