India’s wholesale price index-based inflation for November came in at 0%, down from from its October level of 1.7%, data released on December 15 showed. Manufactured products, which have the single largest weightage in the index at 64.97%, declined 0.3%.
Global factors such as crashing crude prices coupled with decline in domestic prices of food, fuel and manufactured items saw inflation falling to a five-and-a-half year low.
The Wholesale Price Index (WPI) based inflation was at 1.77 per cent in October and 7.52 per cent in November 2013.
Government data released today said food inflation fell to a nearly three-year low of 0.63 per cent. Food inflation is on the decline since May.
Onion prices contracted 56.28 per cent as compared to a contraction of 59.77 per cent in October. In the case of vegetables, the contraction was 28.57 per cent.
However, prices of protein-rich items such as eggs, meat and fish rose during November at 4.36 per cent, while inflation in potatoes stood at 34.10 per cent.
Inflation in manufactured products, such as sugar, edible oils, beverages and cement, fell to 2.04 per cent in November as against 2.43 per cent in the previous month.
Prices in fuel and power segment contracted by 4.91 per cent, as against 0.43 per cent inflation in October.
The sharp drop in WPI inflation, which fell for the sixth month in a row, came at the back of retail inflation declining to a record low of 4.38 per cent in November.
The decline in both retail and WPI inflation for November coupled with contraction of industrial production to 4.2 per cent in October will put pressure on the RBI to lower interest rates to boost growth.
The Reserve Bank has maintained a status quo in interest rates since January. The RBI factors in retail inflation while formulating its monetary policy.
Finance minister Arun Jaitley too on several occasions had nudged the RBI to cut rates. The issue also figured during a debate in the Lok Sabha last week.
The RBI Governor Raghuram Rajan has emphasised that interest rate cut by itself would not lift the economy. The economy is estimated to grow in the range of 5.4-5.9 per cent this fiscal.
Industry has been demanding easing of interest rates to boost growth, which has slumped to 4.7 per cent in 2013-14. The industry's pitch for rate cuts and economic reforms has become sharper, with factory output slipping further to log a 4.2 per cent drop in October. Of most concern in the data released on Index of Industrial Production (IIP) was a 7.6 per cent decline in manufacturing output that industry has been warning against, while calling upon the RBI to cut interest rates and the government to push reforms.
The RBI has set a target for CPI inflation at 8 per cent by January 2015 and 6 per cent by January 2016.
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