India’s headline inflation slowed to the lowest level in more than two years in January to 6.55%, enabled by a high base and cheaper food items, although the relative stickiness of manufactured goods prices continued to be a cause for concern.

Finance minister Pranab Mukherjee said that inflation would continue to decline and stand closer to 6% in March, although the softening of manufactured goods prices might be more gradual.

Analysts said that the Reserve Bank of India will likely wait until April to ease interest rates. The Q3 GDP data, expected on February 28, and how the government plans to handle the fisc in the Budget will also be factors the RBI will weigh before taking a call on when to start cutting rates.

Wholesale price based inflation rose at its slowest gain since November 2009 in January, as compared to 7.47% increase in December, official data showed Tuesday. Headline inflation was 9.47% in January last year. The cooling of inflation is the latest in the series of good news for the economy after the manufacturing sector grew at its fastest pace in eight months in January while the services sector expanded most in six months.

Food inflation fell 0.52% in January from a 0.74% rise in December as vegetable supplies remained steady, while manufactured items index gained 6.49% compared with 7.41% in the previous month. Food articles have a 14.3% weight in the WPI basket while manufactured items account for 65%. Fuel and power inflation rose 14.21% from a year before, compared with 14.91% in December. Primary articles index rose 2.25% in January, compared with 3.07% in December.

(Sourced from Indianexpress.com)