India’s inflation falls sharply to 6.8 percent

MUMBAI, India - Lower fuel prices have pushed India’s inflation down sharply, the Ministry of Commerce said Thursday, giving the government more leeway to stimulate the country’s flagging economy.

By (AFP)

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Published: Thu 18 Dec 2008, 7:31 PM

Last updated: Sun 5 Apr 2015, 12:11 PM

The wholesale price index - India’s most-watched inflation measure - hit 6.8 percent for the week ended Dec. 6, down from 8 percent for the prior week.

This time last year, inflation was just 3.8 percent.

The nation’s central bank has said it would like to see inflation, which hit a 13-year high of 12.9 percent in August, below 5 percent as soon as possible.

The weekly price of naphtha fell by 23 percent, gasoline by 10 percent, aviation turbine fuel by 7 percent, and light diesel oil by 5 percent, the ministry said.

Falling commodities prices mean central banks - in India and elsewhere -can cut interest rates faster than they otherwise might have, said Subir Gokarn, chief Asia-Pacific economist for Standard & Poor’s.

‘From a macroeconomic perspective that’s good news,’ he said.

Business groups in India have been pushing the government to do more to stimulate India’s shuddering economy.

Early this month, the central bank slashed the nation’s key interest rate by a full percentage point, and the government announced $4 billion in new spending and a sweeping 4 percentage point tax cut.

The Federation of Indian Chambers of Commerce and Industry, a major business group, has been lobbying for deeper rate cuts and asked the Reserve Bank of India to further reduce requirements for the amount of money commercial banks must hold in cash and government securities.

The sharp drop in inflation helped boost markets Thursday, with the benchmark Sensex index closing up 361.14 points, or 3.7 percent, at 10,076.43.

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