The annual rate of inflation for the month of December 2011 stood at 7.47% as compared to 9.11% for the previous month and 9.45% during the corresponding month of the previous year on cheaper food items. This may prompt the central bank to cut policy rate in its forthcoming review meeting. Build up inflation in the financial year so far was 4.95% compared to a build up of 7.12% in the corresponding period of the previous year.
The index for primary articles declined by 1.6 %, the index for 'Food Articles' group declined by 3.1 % due to lower prices of fruits & vegetables, condiments & spices, urad, poultry chicken, tea, jowar rice, ragi, barley etc. The index for 'Non-Food Articles' group rose by 1.3 % due to higher prices of gaur seed, flowers, linseed, soyabean etc. The index for 'Minerals' group rose by 2.6 %. The index for Fuel and Power rose by 0.6 % due to higher prices of naphtha, aviation turbine fuel, light diesel oil and bitumen etc. However, the prices of petrol declined.
The growth in inflation for the manufactured product index is the major concern for the industry as well as for the RBI. This higher inflationary trend eliminates option of reduction in interest rate in RBI's policy due on 24 January 2012
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