India inflation slows to 10-month low

PUBLISHED : Friday, 14 December, 2012, 2:29pm
UPDATED : Friday, 14 December, 2012, 2:29pm

India’s inflation unexpectedly eased in November, a moderation that may not prevent the central bank from keeping interest rates on hold as it studies the effects of a diesel-price increase earlier this year.

The wholesale-price index rose 7.24 per cent from a year earlier, after climbing 7.45 per cent in October, the Commerce Ministry said in a statement in New Delhi today. The median of 34 estimates in a Bloomberg News survey was a 7.6 per cent gain.

Reserve Bank of India Governor Duvvuri Subbarao may wait for more evidence that inflation is on an easing trend before heeding Finance Minister Palaniappan Chidambaram’s call for cheaper credit to back a government policy overhaul.

Growth is slowing in Asia’s third-largest economy as food costs, supply bottlenecks from choked roads and ports and longer-term rupee weakness fanned price pressures and hurt purchasing power.

“Unfortunately, I don’t think we are anywhere close to seeing, on a trend-basis, inflation coming below 7 percent in the near-term,” Shubhada Rao, Mumbai-based chief economist at Yes Bank, said before the release.

“Given the fact that inflation is likely to remain high, the central bank doesn’t have comfort to cut rates as of now.”