In­fla­tion Hits 6-month Low on Cheaper Veg­gies, Pulses

CPI rises 4.83% in Mar from a year ago, ris­ing be­low con­sen­sus es­ti­mate of 5%

The Economic Times - - Economy - Our Bu­reau

New Delhi: Re­tail in­fla­tion de­clined to a six-month low in March on the back of softer veg­eta­bles and pulses prices, open­ing room for fur­ther re­duc­tion in in­ter­est rates a few months later should the soft­en­ing trend con­tinue.

The con­sumer price in­dex (CPI) rose 4.83% in March from a year ago, data re­leased by the sta­tis­tics of­fice showed, ris­ing well be­low the con­sen­sus es­ti­mate of around 5% and sharply lower than 5.26% uptick in Fe­bru­ary. The March con­sumer in­fla­tion is be­low the Re­serve Bank of In­dia’s tar­get of 5% con­sumer in­fla­tion by the end of FY17.

“We ex­pect RBI to main­tain sta­tus quo in June, and then con­sider ad­di­tional 25bps of repo rate cut in 2HCY2016,” said Upasna Bhard­waj, Econ­o­mist, Ko­tak Mahin­dra Bank.

RBI had cut repo rate, the key pol­icy rate, by 25 ba­sis points on April 5 while adding that mone­tary pol­icy stance rema- ins ac­com­moda­tive, im­ply­ing that rate could be cut fur­ther if in­fla­tion fell. One ba­sis point is one hun­dredth of a per­cent.

In­dia’s weather of­fice has forecast a nor­mal mon­soon rain­fall af­ter two-years of deficiency, which should fur­ther ease in­fla­tion con­cerns. The other risk to in­fla­tion is from de­mand pres­sure aris­ing from the rise in wages of gov­ern­ment em­ploy­ees with the im­ple­men­ta­tion of the sev­enth pay com­mis­sion.

Re­tail in­fla­tion in veg­eta­bles eased to 0.54% in March from a high of 6.4% in Jan­uary. Pulses in­fla­tion fell to a six-month low of 34.15% in March. In­fla­tion in the foods and bev­er­ages cat­e­gory de­clined to 5.27% in March from 5.52% in Fe­bru­ary.

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