Key India inflation rate eases to 9-month low ahead of elections

MUMBAI, India – India’s key inflation rate has dropped to its lowest level in nine months. The easing of the price increases comes less than a month before general elections in the world’s most populous democracy.

The wholesale price index for February was 4.7 per cent higher than the same month the previous year. The inflation rate has dropped from 7.5 per cent in November.

Helping tame inflation was a slowdown in previously soaring food prices. The index of food articles was up 8.1 per cent in February, down from 19.7 per cent in November in part because of favourable monsoon rains that boosted farm production.

The price of onions, a key ingredient in Indian cuisine that had increased in price by 293 per cent by late last year, dropped by 20 per cent in February over the same month in 2013.

Friday’s data was the latest positive news this week for Asia’s third-largest economy. India has been suffering from a combination of low growth and high inflation that has limited the central bank’s scope to stimulate the economy by cutting interest rates.

Other reports this week showed a slight increase in industrial production, where a drop had been expected, suggesting the economy may have finally bottomed out.

With the February inflation numbers within the Reserve Bank of India’s target of 4-5 per cent, the door could be open for an interest rate cut aimed at encouraging investment and spending when the central bank next meets April 1.

Still, frustration with high prices and anemic growth are likely to hurt the ruling coalition government led by the Congress party in elections beginning April 7. The opposition Bharatiya Janata Party, a Hindu nationalist bloc, is expected to make gains and possibly form the next government.