India's December inflation slides to 7.47%
2012-01-16 17:23:20
India's annual inflation rate fell to a two-year-low of 7.47 percent in December, down from 9.11 percent in November, data showed on Monday, raising the prospect of central bank interest rate cuts.
The latest inflation level is its lowest since December 2009 and the first time in 13 months that inflation has dropped below nine percent.
The fall was in line with predictions by most economists after food prices tipped lower in recent weeks.
India's closely-watched Wholesale Price Index has been near double figures for months, heaping pressure on the government and the central bank to maintain tight monetary policy.
After the data was announced, India's finance minister Pranab Mukherjee told reporters that he expected headline inflation to moderate to between 6.0 percent and 7.0 percent by the end of March.
The Reserve Bank of India (RBI), which has raised interest rates 13 times since March 2010, meets next week and has indicated that it will begin looking at cutting borrowing costs.
Economic growth has slowed sharply in recent months, with leading industry figures highly critical of the central bank's aggressive cycle of rate hikes.
Indian policymakers may now shift their focus from battling inflation to reviving economic growth, which fell to 6.9 percent in the July-September quarter.
"Today's data alters our interest rate outlook slightly," Glenn Levine, senior economist at Moody's, said in a statement, adding that it could give the RBI enough reason to lower rates before March.
"From here, we expect inflation to cool a little in the coming months," he said in the note to clients.
Shubhada Rao, chief economist with private Yes Bank, said: "We see inflation declining from here to about 6.5 percent by March."
Experts said the central bank is unlikely to lower interest rates at the January 24 meeting as it would need to study macro-economic data further as the Indian currency struggles.
The rupee -- Asia's worst performing currency last year -- lost more than 20 percent of its value against the US dollar in 2011.
A lower rupee fuels import costs and puts pressure on inflation.