For the week ended 10 December, Primary Articles Inflation falls to 3.78% and food inflation falls to 4 year low 1.81%. The reason we are seeing this sharp fall is not just because of the base effect that is playing out due to sharp increase in prices of food and non food articles rising same time last year. For the last 6-7 weeks, the primary articles prices have been coming down and thus you see such a sharp fall in this inflation category. From being above 11% in the month of October, primary articles inflation is going to fall to 2.5-3% for the month of December. Non Food inflation had already slid in the past and now it is pretty much flat every week and the resilient food inflation lately has started coming off very sharply. I wouldn’t rule out a deflation in prices of primary articles if this kind of trend continues for some more time.

Fuel Inflation as expected is pretty flat at about 15% and should remain so for the month of December. It is expected to start sliding from the month of January, all the way to mid 2012. One could only wish that Brent Oil would have fallen off resulting in fall in petrol prices and coming off of fuel group inflation but that looks like a distant dream.

My prediction for the month of December is that Primary Articles inflation to be around 2.5%, Fuel Group to be around 15% and Manufacturing Inflation to be anywhere between 7-7.5%. This translates to a headline inflation of anywhere between 7.4% – 7.6% which is a substantial drop from the month of November where we saw inflation being around 9.11%. I hope RBI takes note of this and do something positive on it’s next meet on January. Personally I’m expecting a CRR cut at least if not rate cuts.

Related posts:

1. Inflation Might Come Off Faster Than Expected
2. Unexpected Turn Out Of Markets
3. Market Is Testing Your Patience
4. My Views On The Market
5. Time To Press The Panic Button?