India’s headline inflation fell to 7.47 per cent, it’s lowest in two years, in the month of December 2011, backed by the cheaper prices of food items in the country.

India’s inflation, which is based on Whole Sale Price Index (WPI), was recorded at the level of 9.11 per cent recorded in November. The inflation was recorded at the level of 9.45 percent in December of 2010.

The fall comes as a relief to the central bank, the Reserve Bank of India (RBI) and the central government which have taken the stance of higher interest rates in order to control the inflation.

The inflation remained rigidly high even as after more than a dozen hikes in rates by the central bank, the Reserve Bank of India since March 2010. The moderating of inflation might convince Reserve Bank to cut policy rates during its upcoming policy review this year.

The RBI governor D Subbarao has already indicated that the central bank is considering a reversal of the monetary policy as the inflation is falling and the high interest rates have affected economic growth in the country. The fall in inflation is due to a good kharif harvest as well as a high base.

Finance Minister Pranab Mukherjee has said that he is satisfied with the fall in food items and believes that if the trend continues, the overall inflation will be under control allowing authorities to increase interest rates and boost economic growth, which has shown signs of a slowdown in recent months.