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April inflation eases to 5.2%; gives RBI space for rate cut

Last Updated: Thursday, May 15, 2014 - 17:48

New Delhi: Inflation eased to 5.2 percent in April due to drop in prices of food items, providing some space to RBI for cut in key rate at its bi-monthly monetary policy on June 3.

The inflation, as measured by the Wholesale Price Index (WPI), had increased to 5.7 percent in March from 5.03 in February.

As per the government data released Thursday, the inflation in the overall food segment, including eggs and fish, eased to 8.64 percent in April, from a high of 9.9 percent in March.

Although there was increase in potato prices, the overall inflation in the vegetable segment eased to 1.34 percent from 8.57 percent in March. Fruits too were marginally costlier in April as compared to the previous month.

Commenting on the data, Finance Secretary Arvind Mayaram hoped the declining trend is likely to continue.
"We are encouraged that the inflation numbers are coming down... On the whole at the moment, it appears that we are on track as far as inflation is concerned... (it is) something to smile about," he told reporters outside Finance Ministry.

The WPI data further showed easing inflation in fuel and power segments as well as the manufactured items group.

Inflation based on Consumer Price index, on the other hand, had shot up to a three-month high of 8.59 percent.

The RBI considers both the inflation data, along with other economic indicators, while deciding monetary policy.

Amid demand for reduction in key interest rate to boost economy, the Reserve Bank's monetary policy review on June 3 would be keenly watch.

In April, it had chosen to keep the policy rate (repo) unchanged at 8 per cent in as retail inflation was "sticky".

Industry chamber Ficci said meanwhile that given the recent increase in the diesel prices and uncertain outlook for monsoon, price movements will have to be critically watched going ahead.

"For the new government this would be the single biggest challenge. We look forward to a comprehensive action plan to tackle this situation," it said.

The WPI data revealed that February inflation has been revised upward to 5.03 percent from earlier estimate of 4.68 percent.

In April, 2013 the WPI inflation was 4.77 percent. Build up in inflation in the 2013-14 fiscal was 0.22 percent, compared to 0.71 percent in the previous fiscal.

ICRA Senior Economist Aditi Nayar said the decline in core-WPI notwithstanding, RBI is expected to maintain a status quo on the repo rate, with concerns related to the impact of a potentially unfavourable monsoon on the CPI trajectory remaining paramount.

Another industry chamber Assocham said the underlying reason for prolonged un-abated hyper inflation "remains that of supply side constraints and addressing these constraints pose perhaps the biggest challenge to the new government".

As per the data, the index for non-food articles group declined by 0.4 percent to 216.3 from 217.2 for the previous month due to lower price of fodder, raw rubber, raw silk, castor seed, raw cotton and flowers.

First Published: Thursday, May 15, 2014 - 14:03
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