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India’s inflation eases to 3-year low of 6.62%
February 15, 2013
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NEW DELHI: India’s headline inflation rate moderated to its lowest level in more than three years in January, helped by a slower rise in fuel and manufactured goods prices, which could give policymakers more leeway to revive a slowing economy.

Wholesale prices  – India’s main inflation gauge  –  rose  6.62 per cent in January from a year earlier, the slowest pace since November 2009 and below the 7.0 per cent annual rise predicted by economists in a Reuters poll. Headline inflation stood at 7.18 per cent in December.

“This shows that finally inflation is easing, and fits with the growth slowdown,” said A. Prasanna, economist at ICICI Securities Primary Securities Dealership in Mumbai.

“I think March inflation will be lower than RBI’s (Reserve Bank of India) projection and that should give RBI the comfort to cut rates by 25 basis points in March.”

Fuel prices rose 7.06 per cent in January from a year earlier, compared with an annual rise of 9.38 per cent in December.

Manufacturing goods inflation dropped to 4.81 per cent from 5.04 per cent in January. Non-food manufactured inflation -a barometer for demand-driven price pressures -eased to 4.1 per cent during the month from 4.2 per cent in December.

C. Rangarajan, the chief economic adviser to Prime Minister Manmohan Singh, said the January number was “a welcome sign” and forecast inflation would drop to 6.5 per cent by March, with core inflation stabilizing below 4 per cent.

The reading for November was unrevised at 7.24 per cent.

India’s 10-year government bond yield fell 3 basis points after the data. The 10-year yield was trading at 7.81 per cent from its 7.84 per cent close on Wednesday.

Reuters

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