Headline inflation fell to a two-year low of 7.47% in December 2011 on cheaper food items, a factor which may prompt the Reserve Bank to cut policy rates in the upcoming review.

Headline inflation, as measured by Wholesale Price Index (WPI), had stood at 9.11% in November. It was 9.45% in the same month of 2010.

The latest numbers are the lowest since December 2009 when headline inflation was at 7.15%.

As per the official data released today, vegetables were cheaper by 34.18% and wheat by 3.81% on an annual basis. Potato and onion prices also fell by 35.45% and 60.45% year-on-year during December. (Low food inflation)

Prices of food items rose at a lower rate of 0.74 per in December, compared to 8.54% expansion in the previous month.

Food articles have a 14.3% share in the WPI basket and experts attributed the moderation in inflation to cheaper food articles.

Inflation in overall primary articles stood at 3.07% in December, compared to 8.53% in November.

Non-food primary articles, which include fibres and oil seeds also showed moderation by registering an inflation of 1.48% in December, compared to 3.22% rise in the previous month.

However, inflationary pressure continued in manufactured items, which which have a weight of around 65% in the WPI basket.

Prices of manufactured products, went up by 7.41% year-on-year in December, as against 7.70% in the previous month.

Inflation in manufactured items has been high since February 2011, when it crossed the 6%-mark.

For more visit: Business Standard

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