Consumer price inflation has cooled down considerably for the month of December 2013, thanks primarily to declining vegetable prices. This is certainly a fresh whiff of air in a stagnated economic environment. At least the focus can shift to growth rather than on controlling prices.
According to the provisional data released by the Central Statistics Office (CSO), consumer price inflation (CPI) for the month of December 2013 has slowed down to 9.87% on a yearly basis compared to 11.6% for the month of November 2013.
Rural CPI stood at 10.49% as compared to 9.11% for the urban areas. Both, rural and urban areas have seen CPI dropping compared to the previous month where they stood at 11.74% and 10.53% respectively.
The factors that have helped moderation in CPI were food and beverages prices, which account for 49.71% of the total CPI. Total CPI fell from 14.72% in the month of November to 12.16% for the month of December 2013. Even Fuel and light costs saw a marginal drop from 7% at the end of November to 6.98% for the month of December 2013.
The moderation in CPI will have a positive bearing in tomorrow’s trades, especially on rate sensitive sectors, as it is expected that the RBI in its next policy meet will at least maintain a status quo on interest rates if not reduce them. IIP for the month of November has contracted by 2.1% and this is primarily the reason why interest rates will not be tinkered with. With inflation coming down, the RBI can now focus on the growth of the economy and introduce measures accordingly.
