Inflation drops to 5-year low of 1.77% in October

Continuing decline in food prices, including vegetables, pulled wholesale price inflation to a five year low of 1.77% in October.

The Wholesale Price Index (WPI) based inflation was at 2.38% in September and 7.24% in October 2013.

As per data released by the government today, the food inflation fell to a nearly two-and-half year low of 2.7%. Food inflation is on decline since May.

The sharp drop in WPI inflation, which fell for the fifth month in a row, came at the back of retail inflation declining to a record low of 5.52% in October.

The rate of price rise in onion contracted 59.77% as compared to a contraction of 58.12% in September.

In case of vegetables, the contraction was 19.61%, while in protein rich items of egg, meat and fish it was 2.58% in October.

During the month, inflation in potato stood at 82.11%, against 90.23% in the previous month.

Inflation in manufactured products, like sugar, edible oils, beverages and cement, fell to 2.43% in October as against 2.84% in the previous month.

The August WPI inflation was revised higher to 3.85% from 3.74% earlier, the data said.

Inflation in the fuel and power segment which include LPG, petrol and diesel declined to 0.43% as compared to price rise of 1.33% in September.

The Reserve Bank which maintained status quo in interest rate since January, will come out with the monetary policy review on December 2. The RBI factors in retail inflation while formulating its monetary policy.

The decline in both retail and WPI inflation for October, coupled with improvement in industrial output for September, will put pressure on the RBI to lower interest rates to boost growth.

An uptick in manufacturing and capital goods pushed industrial output to a three-month high of 2.5% in September.

Industry has been demanding easing of interest rates to boost growth, which has slumped to 4.7% in 2013-14.

The economy is estimated to grow in the range of 5.4-5.9% this fiscal.