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Inflation had stood at 8.58% in October
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Easing food prices pulled down the inflation to 11-month low of 7.48% in November, raising hopes that the Reserve Bank of India (RBI)will not go for a hike in key rates in its monetary policy review on Thursday.
The fall in inflation prompted finance minister Pranab Mukherjee to express hope that it will come down to around 6% by this fiscal-end. The Reserve Bank has pegged it at 5.5% by March.
"I am hoping it (inflation) to be around 6% by March," finance minister Pranab Mukherjee told reporters here.
He said after quite some time food inflation has become "very moderate"
The last time inflation was below 8 per cent was in December 2009 when it stood at 7.31%.
Planning commission deputy chairman Montek Singh Ahluwalia said "inflation is comfortable. I think it does vindicate the government's proposition that we are not facing an accelerating inflation or inflation that is out control".
According to data released today, prices of most food items declined or changed very little. However, onion was an exception since it turned expensive by as much as 29.35%, as its crop was damaged by unseasonal rains in parts of Maharashtra, particularly Latur, the biggest producer.
Fruit prices were also up 3.61%.
Prices of manufactured items also moved in a narrow range.
This is the fourth consecutive month when the overall inflation has been in the single digit. It had remained over 10% for six months till July.
The latest figure bears out the projection of chief economic advisor Kaushik Basu who had earlier this month said that inflation in November will be down to 7.5%.
Inflation was at 4.50% in the same month last year. It had stood at 8.58% in October.
Leading economists are also hopeful that inflation would be around 6 per cent this fiscal-end.
"To us, the 6% target set by government looks likely to be achievable. You must see that inflation is low despite having a low numbers last year," said Crisil chief economist DK Joshi, referring to the 4.50% inflation during the corresponding month of 2009.
He said that inflation will remain low in the next few months, though there may be minor hiccups.
"The fall is in line with our expectations and we believe that inflation will remain moderate till at least May next year," Axis Bank senior vice president Saugata Bhattacharya said.
However, the recent inflation figure is provisional and may be revised later, like inflation for September this year, which was revised to 8.93% from the provisional estimate of 8.62%.
Also going forward, oil prices would play a key role in determining inflation since freezing winters in Europe may raise the oil demand and thereby oil prices further.
During the week, petrol prices at home rose by Rs 1.50-Rs 2 per litre.
Global oil prices were ruling at US$ 88 a barrel today, despite some moderation.
The moderation in inflation is likely to prompt the RBI to refrain from taking any tough monetary stance in its mid-quarterly review slated for December 16.
"As for the RBI mid-quarterly review on December 16, we do not think that it will take any action. The inflation has moderated and that has helped," Joshi said. Bhattacharya concurred with the view and said the RBI was likely to continue with its current monetary stance.
RBI has raised its policy rates six times this year to tame rising inflation.With inflation, more or less under control, and economy projected to grow up to over 9% this fiscal, RBI is likely to pause its tight monetary policy.
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