India inflation drops to 3-year low of 6.6 percent

MUMBAI, India (AP) ? India's stubbornly high inflation eased to a three-year low of 6.6 percent in January, a glimmer of good economic news that adds to expectations the central bank will further reduce interest rates to boost slowing growth.

Wholesale price inflation released Thursday was down from 7.2 percent year-on-year in December.

India's economy is expanding at its slowest pace in a decade, with gross domestic product predicted to grow as little 5 percent in the fiscal year ending in March. That's down from 9 percent in early 2011, and it's paired with rising budget and current account deficits.

Worrisomely high inflation has been the main reason that the Reserve Bank of India has hesitated to cut interest rates to stimulate investment and spending.

The easing of inflation pressure ? the index has now inched down for four months ? gives the central bank more scope to lower borrowing costs but many analysts say the cuts won't be large as inflation is still higher than the RBI would like. The bank has pledged to bring wholesale inflation down to below 4.5 percent.

Manufactured goods led the drop in overall inflation, with price rises slowing to 4.8 percent in January over a year earlier. Fuel and power costs were up by 7.1 percent, but that was down from 9.4 percent in December. Food prices, which are more volatile, recorded some sharp increases. Pulses were up 16.9 percent and potatoes surged 79.1 percent.

Source: http://news.yahoo.com/india-inflation-drops-3-low-6-6-percent-081844638--finance.html

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