India’s inflation slowed to an 11- month low, paving the way for further stimulus measures to bolster an economy expanding at the weakest pace in six years. Bonds rose. Wholesale prices climbed 5.24 percent in the week to Jan. 3 from a year earlier after gaining 5.91 percent the previous week, the commerce ministry said in New Delhi today. Economists expected an increase of 5.33 percent. Officials from Prime Minister Manmohan Singh’s government are meeting industry representatives next week to discuss ways to boost growth in Asia’s third-largest economy. Economists reckon Reserve Bank of India Governor Duvvuri Subbarao will take advantage of slowing inflation to add to four interest-rate cuts in less than three months. “The decline in inflation gives the central bank room to lower rates,” said Prasanna Ananthasubramaniam, an analyst at ICICI Securities Ltd. in Mumbai. “Further declines in inflation and slowing demand will make policy making very challenging.” Indian 10-year bonds extended gains after the inflation release. The yield on the 8.24 percent note due April 2018 fell 8 basis points to 5.50 percent as of 11:20 a.m. in Mumbai, according to the central bank’s trading system. Inflation in India has more than halved from a 16-year high of 12.91 percent in August as a global recession drives down prices of oil and other commodities. That’s given the government and the central bank the opportunity to unveil measures to spur a slowing economy without fanning prices. Global Recession Governor Subbarao has slashed the Reserve Bank’s benchmark repurchase rate by 350 basis points to 5.5 percent since October. Borrowing costs may be lowered again when the central bank releases its next policy statement on Jan. 27, said Dharmakirti Joshi, an economist at Mumbai-based Crisil Ltd., the local unit of Standard & Poor’s. Prime Minister Singh, facing elections before May, is also spending more to shield India from the world economy’s worst crisis since the Great Depression. Singh’s government on Jan. 2 unveiled a second stimulus package to inject capital into banks and allow overseas investors to double purchases of debt. An initial plan released Dec. 7 allocated an additional 200 billion rupees ($4 billion) in spending in the year ending March 31 and cut taxes on cars, motorbikes and other consumer goods. Stimulus Package Industry representatives will meet government officials on Jan. 21 to discuss further measures to stimulate India’s $1.2 trillion economy, Trade Minister Kamal Nath said Jan. 12. Growth in India’s economy has slowed for two straight quarters, and the government is forecasting an expansion of 7 percent this fiscal year, the weakest since 2003. Growth may ease to 6.2 percent in the year from April 1, according to HSBC Group Plc. Inflation has eased amid weaker oil prices. Crude costs have tumbled more than 50 percent from a year ago, allowing the Indian government to cut retail prices of gasoline and diesel on Dec. 5 by as much as 10 percent. Today’s inflation rate may be revised in two months, after the government receives additional price data. The commerce ministry today revised the inflation rate for the week to Nov. 8 to 8.71 percent from 8.90 percent.

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