NEW DELHI: India posted better inflation data for a second straight day Tuesday, stirring hopes it is making headway in taming prices and will be able to cut interest rates to spur a sluggish economy.
Wholesale inflation slowed to a five-year low of 2.38 percent last month, its weakest since October 2009, commerce ministry data showed.
The encouraging figures came a day after the release of figures showing that the more widely tracked consumer price inflation fell to 6.46 percent in September.
Consumer inflation now is at its lowest level since the government introduced a new index nearly three years ago, and is down from over 10 percent last year.
Analysts, however, noted that high year-ago figures had helped improve the wholesale and consumer inflation numbers and warned that this statistical base effect would wear off around November.
That will be a moment of truth when the Reserve Bank of India will be able to see whether the downward inflation trend can be sustained, they said.
The central bank has said that before lowering rates it wants to "break the back of inflation" which has been a persistent problem in India, where the World Bank says a quarter of the 1.2-billion population lives in deep poverty.
The bank, which kept its trend-setting lending rate on hold at a steep eight percent last week, has set a goal of whittling down consumer inflation to six percent by January 2016.
Capital Economics Asia economist Mark Williams said a rate reduction could come late this calendar year if inflation news remained positive.
"Many analysts are looking to the next financial year (starting April) for the first rate cut but it could come this calendar year if the news is good," Williams told AFP.
India's economy has posted two years of sub-five-percent growth, the longest slowdown in a quarter-century, and business has been clamouring for rate cuts to reduce borrowing costs and spur investment and consumer spending.
September's consumer and wholesale price inflation drop was helped by bountiful rains in the last stages of a patchy monsoon that reduced food prices.
Global crude oil prices, which have fallen nearly 20 percent this year, have also helped improve the inflation outlook in the country, which depends on energy imports.
"If this (downward) trend is sustained, the central bank remains on track to achieve its six-percent consumer price inflation target," said Frederic Neumann, co-head of Asian Economic Research at HSBC.
However, the central bank is likely to "wait for further evidence price pressures are contained", Neumann said, forecasting monetary policy authorities will remain "in wait-and-see mode for an extended period of time".
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