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India wholesale prices drop 2.06% in February

[MUMBAI] India's wholesale inflation fell a sharper-than-expected 2.06 per cent in February, the fourth straight drop, as global oil prices sit at multi-year lows, data showed on Monday.

The fall in the Wholesale Price Index (WPI), the inflation measure with the biggest basket of goods, was greater than a 0.8 per cent drop predicted by a Bloomberg survey and will fuel talk of another interest rate cut.

Prime Minister Narendra Modi's right-wing government had earlier revised the November fall in WPI inflation to 0.17 per cent.

The latest figures show food and fuel prices dropped in February, good news for millions of Indians living in chronic poverty who are badly affected by any sharp changes in both categories.

"My sense is that the Reserve Bank of India (RBI) will take this chance and cut 25 basis points in April," said Ashutosh Datar, economist at IIFL Institutional Equities in Mumbai.

The RBI has made two unscheduled cuts this year on easing inflation in a bid to boost business borrowing and assist growth of Asia's third largest economy.

Hopes remain of another cut despite the government, using a new formula, announcing last month that the economy would grow at a robust 7.4 per cent in the ongoing year.

India had been thought to be struggling through its worst economic slowdown in more than two decades by growing below five per cent, not enough to create jobs needed for its millions of young people.

International Monetary Fund chief Christine Lagarde on Monday hailed India as a bright spot in the otherwise struggling global economy.

With the global economy expected to grow at only 3.5 per cent this fiscal year and even Chinese growth slowing, Ms Lagarde predicted India would soon be the fastest expanding major economy.

Governor Raghuram Rajan has made controlling inflation a priority since taking the helm of the RBI in September 2013, often resisting previous calls to reduce interest rates to boost the economy.

But a dip in global crude oil prices and steady food costs have helped control consumer inflation to around five per cent from double digits in 2013.

The RBI has a target of bringing consumer inflation consistently below six per cent by January, and to four per cent for the 2016/17 financial year.

AFP