Inflation eases to 8.90 pc, RBI may cut rates

New Delhi, Nov 20 (PTI) Fall in prices of crude oil,
metals and other manufactured items helped India cool
inflation for the second straight week to 8.90 percent, the
lowest in five months, giving Reserve Bank of India the legroom
needed to cut policy rates to fuel economic growth.

Inflation declined by 0.8 percentage points during the
week ended November 8 from 8.98 per cent a week ago, prompting
analysts to predict that the rate of price rise in India would
come down to around 5.5 percent this fiscal end, much lower
than what was anticipated by the Reserve Bank.

Even as falling international crude prices and abolition
of basic customs duty on Aviation Turbine Fuel by the
Government softened fuel prices and metal rates came down
simultaneously, primary food articles such as vegetables and
fruits turned expensive.

The index for fuel, power, light and lubricants declined
by 0.9 percentage points, as prices of ATF, light diesel oil,
furnace oil and naphtha came down quite a bit.

It was the hike in administered prices of petrol, diesel
and LPG in June that had pushed inflation to double figures.
It remained in double digits till almost the end of October,
returning to single figure only after crude prices fell -
giving the government a breather just ahead of assembly polls
in a number of states, including Delhi.

"Going ahead, the base effect will be favourable to bring
inflation down. We expect it to reach 5.5 percent by March.
This will help RBI to ease monetary policy," Crisil Principal
Economist D K Joshi said.

He expected a 50 basis points cut in short term rates -
Repo and Reverse Repo - as well as 100 basis points slash in
mandatory deposit requirements of banks.

RBI has already injected around Rs 2,75,000 crore in the
system by taking a slew of cuts in policy rates and reserve
ratios. MORE PTI IND
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