Falling prices of vegetables and fuel items brought the inflation to almost zero level in November 2014, the lowest in about five and half years, thus increasing the pressure on RBI to cut rates to boost growth. As per data released by the Government on Monday, the food inflation fell to nearly three year low of 0.63 per cent. Food inflation is on decline since May this year.
The Wholesale Price Index (WPI) based inflation was at 1.77 per cent in October this year, while in November 2013 it was 7.52 per cent. The WPI or headline inflation remained flat mainly on account of falling prices of vegetables, especially onion, edible oil, petrol and diesel.
In view of the moderation in WPI inflation, which has been on declining trajectory for six months, the industry has stepped up its demand for a rate cut. The Reserve Bank of India (RBI) has maintained a status quo in interest rate since January. The RBI factors in retail inflation while formulating its monetary policy.
In its policy earlier this month, RBI Governor Raghuram Rajan had hinted at a rate cut early next year if inflation continued to decline and government took steps to contain fiscal deficit. Inflation in fuel and power segment fell 4.91 per cent, the lowest level since 2009. This is probably the first time when WPI inflation has hit the exact zero level.