India's wholesale inflation falls to two-year low

Feb 14, 2012, 10:00 GMT

New Delhi - India's wholesale inflation rate dropped to 6.55 per cent year-on-year in January, its lowest level in two years, official data showed Tuesday.

The rate, based on an index of wholesale prices, dropped to 7.47 per cent in December after remaining above 9 per cent for 12 months.

The drop was led by a fall in wholesale prices of food articles, according to the latest data.

Finance Minister Pranab Mukherjee said he expected annual wholesale inflation to continue to fall, and to reach close to 6 per cent by March.

'It is still not at an acceptable level,' Mukherjee said.

Analysts said the decrease was likely to pave the way for the central bank to lower interest rates, after several months of monetary policy tightening have begun to slow economic growth.

The bank could lower key interest rates as early as March, NDTV Profit broadcaster quoted Sonal Varma, an economist with Nomura Financial Advisory and Securities, as saying.

The Reserve Bank of India has imposed 13 interest rate hikes since March 2010 to tame runaway inflation.

The government recently downgraded its estimate for economic growth to 6.9 per cent for the fiscal year ending March 31.