Inflation falls to nine-month low of 6.61 pc

New Delhi, Dec 26 (PTI) Inflation almost halved to a
nine-month low of 6.61 per cent from this year's peak of
12.91 per cent, prompting analysts to predict that it would
fall to two per cent by the end of this fiscal and giving more
space to the Reserve Bank of India (RBI) to signal further
cuts in interest rates.

Wholesale prices-based inflation declined by 0.23
percentage points, for the seventh consecutive time during the
week ended December 13 as manufactured goods and food items
became cheaper due to the cascading effect of fuel price cuts
and other factors.

"(The) declining inflation rate provides more leeway to
the RBI to further slash interest rates. I expect a 100 basis
point cut in both the repo (short-term lending rate) and
reverse repo (short-term borrowing) rates," said Crisil
Principal Economist D K Joshi.

In fact, the Mid-Year Review of the economy, tabled in
Parliament, said that an aggressive easing of monetary policy
may be required if manufacturing continues to be affected by
global developments.

The rate of price rise was lower than this at 6.21 per
cent during the week ended March 1 this year. It touched the
peak of 12.91 per cent during the week ended August nine.

Inflation fell from 6.84 per cent a week ago. It was
3.84 per cent a year ago during the corresponding period.

Analysts expect that falling commodity prices and
slackening demand globally may further bring down inflation in
the range of 2-3 per cent by March 2009.

"I expect inflation to drop sharply to below 2 per
cent by March due to the sharp decline in manufactured goods
prices and commodity prices," HDFC Bank Chief Economist
Abheek Barua said.

During the week, manufactured products became cheaper
with basic heavy inorganic chemicals turning cheaper by
7.2 per cent. Also groundnut oil, sugar, cement and certain
textile items like cotton yarn turned cheaper.

Among food items, vegetable prices fell by more than
three per cent followed by tea, cereals, and spices while sea
fish, wheat and bajra got dearer. PTI BSP
DEP
OANA