India inflation hits 9-month low
By Penelope MacRae, AFP
March 15, 2014, 12:05 am TWN
NEW DELHI--India's inflation hit a nine-month low in February, data showed Friday, but analysts saw little chance of any immediate interest rate cut.
Slowing inflation may also have come too late for the embattled Congress-led government which faces elections next month and trails in opinion polls.
Inflation measured by he Wholesale Price Index, the closest watched cost-of-living monitor, eased to 4.68 percent in February from a year ago from 5.05 percent a month earlier.
The figures assume importance as they are the last before the central bank meets on April 1 for its regular monetary policy-setting meeting.
But while inflation is moving in the right direction, chances of near-term rate cuts to boost sluggish growth remain slim with the hawkish bank likely to go into a wait-and-watch mode, economists said.
The bank “is unlikely to entertain the notion of rate cuts just yet,” said Capital Economist's India analyst Miguel Chanco.
The Wholesale Price Index drop takes inflation below the central bank's five percent “comfort” level and beat market forecasts.
The figure comes after consumer inflation, compiled from a smaller goods basket, fell to a 25-month low in February — still unacceptably high for the central bank, economists said.
The bank will not want to risk undermining its inflation achievements “by jumping the gun on interest rate cuts,” said Chanco, forecasting unchanged rates in April.
Fearing a voter backlash, the government has been desperate to tame inflation, which causes huge suffering to its legions of poor supporters. It also wants to revive the economy as it seeks a third term.
Growth slackened last year to a decade-low of 4.5 percent and the government expects 4.9 percent expansion in this fiscal year to March.