Inflation measured by the wholesale price index (WPI) eased to a five year low this September owing to softening vegetable and food prices, providing space for the Reserve Bank of India (RBI) to move on interest rates.
The sharp moderation in wholesale prices follows a significant easing in retail prices in the last month; together the two have lifted the mood of policymakers battling to put a lid on stubborn prices and revive growth. Data released by the Union commerce ministry showed that the annual rate of inflation, based on monthly WPI, stood at 2.38% in September, 2014 compared to 3.74% for the previous month and 7.05% during the corresponding month of the previous year.
The WPI and consumer price index (CPI) numbers and cooling global oil prices have triggered expectation of a cut in interest rates by the RBI but some economists say the central bank would like to wait before moving on easing rates probably in the next fiscal as it gets down to push growth.
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