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India inflation rate drops to surprise 9 month low in Feb Food costs fall

NEW DELHI, March 14, (AFP): India’s inflation slipped to a surprise nine-month low in February, official data showed Friday, offering the government some respite ahead of elections that kick off next month. The Wholesale Price Index —the most widely watched price barometer — eased to 4.68 percent in February from a year earlier from 5.05 percent the previous month. The data — the last before a central bank policy meeting in April 1 — beat market forecasts of 4.9 percent. But the good news may come too late to boost the fortunes of the Congress-led government, which is trailing in opinion polls and which has been desperate to tame inflation and revive the economy as it seeks a third term. Asia’s third-largest economy has been gripped by “stagflation”, economists say, with prices accelerating briskly while economic growth slowed last year to 4.5 percent, its lowest in a decade.

Business has been clamouring for a cut in the benchmark lending rate, now at a hefty eight percent, to boost slumping growth by lowering borrowing costs. Earlier this week, retail inflation, which uses a smaller basket of goods — hit a 25-month low of 8.1 percent in February, but still twice as high as the long-term target of 4.0 percent targeted by the central bank, which has hiked rates three times since September to curb price rises. The slip in February’s inflation the back of a drop in food costs but lashing rains in the past few weeks have hurt crops, which could see prices rise again, economists say. India’s right-wing Hindu nationalists, perceived by business as more likely to get the economy back on track, are tipped to win the general elections, whose results are due in May.

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