Bloomberg News

India Food Inflation Eases to Slowest Pace Since at Least 2006

December 29, 2011

Dec. 29 (Bloomberg) -- India’s food inflation rate fell to the lowest level in at least five-and-a-half years, increasing the scope for the central bank to cut interest rates after it halted a record pace of monetary tightening.

An index measuring wholesale prices of agricultural products, including rice, wheat and vegetables, rose 0.42 percent in the week ended Dec. 17 from a year earlier, the commerce ministry said in a statement in New Delhi today. The increase compares with a 1.81 percent gain the previous week, and is the smallest gain since at least April 2006, according to the earliest available data compiled by Bloomberg.

The Reserve Bank of India refrained from raising rates this month for the first time in eight meetings as inflation eases and the fallout from Europe’s debt crisis threatens growth in Asia’s third-largest economy. Slowing expansion in the region has prompted policy makers to cut or hold borrowing costs in recent months to counter faltering global demand.

“Food inflation is coming off rapidly,” Shubhada Rao, Mumbai-based chief economist at Yes Bank Ltd., said before the report. “We expect the RBI may cut the repurchase rate by 50 basis points in March to support growth.”

India’s benchmark inflation gauge, the wholesale-price index, rose 9.11 percent in November from a year earlier, the smallest gain in a year.

--With assistance from Niveditha Ravi. Editors: Patrick Harrington, Stephanie Phang

To contact the reporter on this story: Tushar Dhara in New Delhi at tdhara1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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