NEW DELHI: Headline inflation dropped to its lowest in three years in December, reinforcing expectations that the Reserve Bank of India will cut rates at its policy review on January 29 to boost the economy, which is headed for its worst showing in a decade. The inflation numbers are the latest piece of data providing backing to those, notably the finance ministry, calling for a cut in interest rates after a fall in industrial output in November reported on Friday. Exports too shrank in December, indicating that the Asia's third-largesteconomy was close to stalling.
The annual rate of inflation, as measured by the wholesale price index (WPI), dropped to 7.18 per cent in December - the lowest since December 2009 - from 7.24 per cent in November, data released on Monday showed. A closely watched sub-component - core inflation - fell to 4.2 per cent in December and revision in data for previous months was in a downward direction, signaling a softening in prices. Some economists say the debate had shifted from the timing of the cut to how much RBI will cut.
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