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Aided by continued fall in food and fuel prices, November Wholesale price index (WPI) based inflation fell to zero per cent from 1.77 per cent in the previous month.
This latest WPI inflation print was significantly lower than the 7.52 per cent reading in the same month last year. Food inflation fell by 0.39 per cent essentially due to sharp drop in vegetable prices.
Food inflation
According to data released by the Government today, food inflation fell to a nearly three-year low of 0.63 per cent. Food inflation has been on the decline since May.
This is probably the first time when WPI inflation has hit the exact zero level. The last time WPI was lower than this was (—) 0.3 per cent in July 2009.
Onion prices contracted 56.28 per cent as compared to a contraction of 59.77 per cent in October. In the case of vegetables, the contraction was 28.57 per cent.
However, prices of protein-rich items including eggs, meat and fish rose during November at 4.36 per cent, while inflation in potato stood at 34.10 per cent.
Fuel prices, manufactured products
Manufactured products inflation fell to 2.04 per cent from 2.43 per cent in October.
Thanks to lower crude prices, fuel and power group fell by 5.4 per cent in November.
The sharp drop in WPI inflation, which fell for the sixth month in a row, comes on the back of retail inflation declining to a record low of 4.38 per cent in November.
Pressure on RBI to cut rates
The decline in both retail and WPI inflation for November coupled with contraction of industrial production to 4.2 per cent in October, will put pressure on RBI to lower interest rates to boost growth.
The Reserve Bank has maintained a status quo in the interest rate since January. The RBI factors in retail inflation while formulating its monetary policy.
Finance Minister Arun Jaitley too on several occasions has nudged the RBI to cut rates. The issue also figured during a debate in the Lok Sabha last week.
RBI Governor Raghuram Rajan has emphasised that an interest rate cut by itself would not lift the economy.
Industry has been demanding an easing of interest rates to boost growth, which has slumped to 4.7 per cent in 2013-14.
The economy is estimated to grow in the range of 5.4-5.9 per cent this fiscal.
(With additional inputs from PTI)
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