Inflation rate based on the wholesale price index fell to 6.55% in January, 2012, the lowest level in over two years, strengthening the argument for monetary policy easing by the Reserve Bank of India (RBI) amid a slowing economy. It was 7.47% in December, 2011, and 9.47% in January, 2011. At the present level, inflation has fallen to the 6-7% level faster than the government prediction of March. The moderation in January was led by a fall in food inflation with prices in the manufactured and primary food segment also falling due to a good harvest. Finance minister Pranab Mukherjee said inflation will be around 6% level by March 2012. Inflation in manufactured products, however, remained high. Inflation in this segment was at 6.49% last month compared to 5.32% in the year-ago period. Price pressure was higher in case of iron (18.5%), metals (12%), chemicals, edible oil and beverages and tobacco (9% each). Inflation in the fuel and power segment stood at 14.21% in January. Economists said inflation would have probably eased further had it not been for the falling rupee, making imports more expensive. Economists also warned of pressures ahead. They pointed out that the government had not passed on the higher oil and gas prices to end-consumers. These may be raised after the assembly polls. Similarly, if the next monsoon is disappointing, there may be fresh pressure on food inflation.
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