Retail inflation falls to record low in new series

RBI might still opt to hold repo rate: Experts

The Consumer Price Index (CPI)-based inflation declined to a record low of sub-three per cent in the new series. However, economists said, the central bank’s monetary policy committee (MPC) might still hold the repo rate in its review next month.

Retail inflation dropped to 2.99 per cent in April against 3.89 per cent in March, on lower rate of price rise in food items, including pulses and vegetables. The inflation had stood at 5.47 per cent in April 2016.

The Central Statistics Office (CSO), which releases the data on Friday, has revised upwards March inflation to 3.89 per cent from 3.81 per cent.

However, economists said the Reserve Bank of India (RBI) would still not cut the repo rate and would wait for more data on monsoon, the impact of the proposed goods and services tax (GST) and the yet-to-beimplemented Pay Commission's report on allowances on prices. “We continue to believe that the RBI would not change its repo rate at least till the unknowns of monsoon, GST and allowances from the Pay Commission are fully factored into the headline CPI numbers," Indranil Pan, chief economist, IDFC Bank, said. Aditi Nayar, principal economist at ICRA, said the MPC might choose to wait until the effects of the GST and the revision in house rent allowance on inflation become clearer, and opt for a pause in the June 2017 policy review.

The six-member MPC factors in the retail data while deciding the bi-monthly monetary policy review. In its policy review on April 7, the RBI panel had left the repo rate, or the benchmark lending rate, unchanged at 6.25 per cent for the third time in a row, citing upside risk to inflation. The next policy is scheduled on June 7.

The mandate of the RBI is to contain inflation at four per cent, with a margin of two per cent on the either side. Pulses and products recorded a sharp fall in prices in April, with deflation of 15.94 per cent, while vegetable prices fell 8.59 per cent.