Looks like inflation is slowly and gradually on the decrease. Headline inflation fell to 7.47% from 9.11% in December, 2011 as measured by Wholesale Price Index (WPI). It is expected that these values will still fall to 6-7% by the end of this fiscal year, March 2012.
Though food inflation declined to 3.36% by the end of December, the overall inflation on manufactured products, fuel and non-food primary items still remains high. Prices of manufactured products, increased by 7.41% in December compared to the previous month which was 7.70%. These account for 65% in the WPI inflation.
RBI has already increased the interest rates 13 times since March 2010 to overcome the effect of inflation. With the coming sustained period of sub-7% growth, RBI is likely to cut these rates and is also expected to decrease the Cash Reserve Ratio (CRR) by March. India’s GDP growth rate reached to 6.9% in the second quarter this fiscal year. However the industrial production fell by 5.1% in October.