New Delhi: India’s inflation unexpectedly eased to lowest in more than five years in the third week of October as the price of fruit and vegetables declined.
Wholesale prices rose 3.02% in the week ended 20 October, from a year earlier—less than the 3.07% gain in the previous week. Analysts had forecast inflation at 3.07%. The slowdown in price gains may only be temporary, as unprecedented foreign inflows threaten to rekindle inflation in the months ahead, according to economists. That may prompt Reserve Bank of India governor Yaga Venugopal Reddy to restrict commercial lending for a fifth time this year. “The weekly number is not reflective of the true inflation estimates due to the lid on fuel prices,” said Dharmakirti Joshi, principal economist at Mumbai-based Credit Rating Information Services of India Ltd (Crisil), the local unit of Standard & Poor’s. “Upward pressure on inflation also continues due to unprecedented inflows.”
After the inflation report, 10-year bonds were almost unchanged . The yield on the benchmark 7.99% note , ,maturing in July 2017, held at 7.85% in Mumbai. The price was unchanged at 100.90. Finance minister P. Chidambaram on Thursday said the Fed’s decision to cut its key rate will increase capital flows into India as it will lead to “opportunities for foreign companies for arbitrage.”