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India inflation falls to eight-month low in December

NEW DELHI, Feb 14, (AFP): India’s inflation fell to an eight-month low in December due to easing food prices, data showed Friday, providing some good news for the government ahead of national elections. The scandal-hit Congress-led government of Prime Minister Manmohan Singh is desperate to tame inflation and revive the economy as it seeks a third term in office at national elections due by May. The Wholesale Price Index — the most widely watched price barometer — eased to 5.05 percent in January from a year earlier, down sharply from 6.16 percent the previous month. The decline was on par with analysts’ forecasts of just under six percent.

The latest figures come after the government announced this week that retail inflation — compiled using a narrower basket of goods — plunged to a two-year low of 8.79 percent in January. With industrial output shrinking by 0.6 percent in December in the third straight monthly contraction, business has been clamouring for a cut in lending rates to help boost slumping growth. But the Reserve Bank of India (RBI) raised its benchmark policy rate to 8.0 percent last month in a bid to wrestle down inflation, which it has signalled is its top priority.

In its mid-year review on the economy presented to parliament this week, the government also said prices need to be curbed. “The outlook on growth is also threatened by certain downside risks, the biggest being the high rate of inflation, which further dents the ability of the RBI to extend monetary policy support to growth revival,” it said. Ministry of Commerce and Industry figures showed Friday food prices, a main driver of inflation, rose 8.80 percent year-on-year, but were down from a rise of 13.68 percent in the previous month. The cost of all vegetables rose 16.60 percent year-on-year, down from 57.33 percent last month, while onions, regarded as a cooking essential in India, rose 6.59 percent, down from a 40 percent rise in December.

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