A labourer smokes a bidi, a local cigarette hand-rolled with tobacco leaf, as he sits on a handcart in a market area on a cold winter morning in the old quarters of Delhi January 14. (REUTERS Photo)
NEW DELHI, January 14 (Reuters): India’s wholesale inflation eased to an eight-month low in December, strengthening views among some economists the central bank could ease its monetary policy stance next month as the country faces a slowdown in manufacturing.
Annual wholesale price inflation edged down to 3.80 percent last month, as food prices hardly rose and fuel cost increases almost halved, government data showed on Monday. The outcome was lower than a provisional 4.64 percent rise in November and below a 4.42 percent increase forecast by economists in a Reuters poll.
The Reserve Bank of India’s Monetary Policy Committee, which mainly monitors retail inflation data and kept interest rates unchanged at a meeting last month, will have leeway to soften its monetary stance at its Feb. 7 meeting, economists say.
Annual growth in India’s industrial output in November slumped to 0.5 percent from an upwardly revised 8.4 percent in October, on a slowdown in auto and garment manufacturing. The economic weakness is a problem for Prime Minister Narendra Modi, who has already been struggling to meet ambitious job creation targets, ahead of an election, which has to be held by May.
Wholesale food prices in December remained almost flat, up 0.07 percent from a year earlier compared with a 1.96 percent fall a month earlier. The figures indicate that rural incomes remain under pressure while consumers are benefitting from easing inflation.
Anger among farmers contributed to the defeat of Modi’s Bharatiya Janata Party in three key state elections late last year.
Retail inflation in December lowest since June 2017
India’s retail inflation rate dropped to 2.19 percent in December from a year earlier, the lowest level since June 2017, government data showed on Monday. The decline was helped by a fall in food prices and smaller increases in fuel costs.
Analysts polled by Reuters had forecast December’s annual increase in the consumer price index at 2.20 percent, compared with November’s 2.33 percent.