India’s Food Inflation Drops to One-Year Low

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Nov. 11 – India’s food inflation, as measured by the wholesale price index (WPI), slowed to 12.3 percent for the week ending October 30, according to official data released by the Ministry of Commerce on Thursday.

The new rate is an improvement over the 12.85 percent reported the week prior and marks the fourth straight week of decline for India’s WPI – a measure of prices for basic agricultural products like beans, rice, and vegetables.

The inflation rate for the week ending October 30 marked a one-year low for the WPI and is a significant improvement over the index’s 18.69 percent 52-week average inflation rate.

The reduced inflation rate is no doubt linked to the Reserve Bank of India’s six interest rate hikes this year, the latest of which occurred on November 2.

In its latest move, India’s RBI increased the nation’s repurchase rate, or lending rate, by a quarter point to 6.25 percent and the reverse repurchase rate, or borrowing rate, by the same margin to 5.25 percent.

The RBI, which has been the most active central bank in Asia over the last year, said that the new rates will remain stable for the near future barring any shocks to the economy. RBI Governor Duvvuri Subbarao believes that the term “near future” is at least three months.