Indian inflation slips to 9 percent
By ERIKA KINETZ,Associated Press Writer AP - Friday, November 14
MUMBAI, India - Falling commodities prices continued to cool India's inflation, which has been running near a 13-year high, the Ministry of Commerce said Thursday.
The wholesale price index _ India's most-watched inflation measure _ eased to 9 percent for the week ended Nov. 1, down from 10.7 percent for the prior week.
It was the first time inflation has slipped to a single-digit rate since hitting a high of 12.4 percent in the week ending Aug. 2. This time last year, inflation was 3.4 percent.
Policy-makers have been watching inflation rates closely, as they seek to reinvigorate growth without letting prices run out of control in the build up to national elections.
Business groups have been pushing for further interest rate cuts to stimulate India's economic growth, which has faltered as foreign investment drained from the country.
This week, Goldman Sachs downgraded its economic growth forecasts for India, to 6.7 percent from 7.5 percent for fiscal year 2009 and to 5.8 percent from 7 percent for fiscal year 2010.
Goldman said the shock to India's financial sector from Wall Street's convulsions has been "larger than expected" and predicted a continuing slowdown in capital expenditure, domestic consumption, and exports.
Tushar Poddar, vice president of Goldman's Asia economics research team, also warned that nation could be at the precipice of a downward credit spiral even though Indian banks are well-capitalized and the country's consumer credit boom is just four years old.
"As the balance sheets of households and corporates deteriorate, they are less able to pay off loans to banks, which hurt banks and makes them less willing and able to extend fresh loans, which in turn squeezes credit for corporates and worsens their balance sheet," he wrote. "This financial decelerator increases the amplitude and length of the downturn in the business cycle."
He said that_unlike China_the government's looming fiscal deficit will limit its ability to inject a large fiscal stimulus.
The Reserve Bank of India and the International Monetary Fund have also recently downgraded their growth forecasts for India.
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