Due to a drop in food prices, India’s annual consumer price inflation had eased further to 2.18 per cent in the month of May, from 2.99 percent in April, according to data released by the government on Monday. This number is the lowest inflation rate that the country has witnessed ever since it started publishing an economy-wide consumer price index in the year 2012. Retail food prices fell 1.05 percent in May from last year. Comparatively, it was 0.61 percent gain in April. Meanwhile, prices of vegetables and pulses have declined sharply but there has been only a marginal rise in fruit rates. Additionally, clothing, housing, fuel and light also saw lower inflation last month. While commodity prices have come down and there has been a surge in the rupee, it has made imports cheaper and resisted the price pressures. The biggest comfort has been the forecast of a normal monsoon this summer. However, that does not come as good news for a large number of India’s debt-ridden farmers who are struggling with low prices amid a glut of produce. The CPI based retail inflation stood was at 2.99 percent in April 2017. In May 2016, it was at 5.76 percent. The overall food inflation was in negative territory at minus 1.05 percent during the month. Prices of vegetables declined by 13.44 per cent and that of pulses and products by 19.45 per cent.
As retail inflation dropped to an all-time low of 2.18 percent in May. it undershot the upper limit of inflation since the Reserve Bank of India’s (RBI) had set a mid-term target of 4 percent for the last seven months. Now the pressure has mounted on the central bank to resume interest rate cuts to juice up economic growth that has reportedly hit the lowest level in more than two years. At RBI’s policy review last week, the central bank left key interest rates unchanged but lowered inflation projections. Gaurav Dua, research head at brokerage Sharekhan Ltd told Reuters, “This clearly shows that the (inflation) risk is on the downside. This opens up a scope for a rate cut in August.” The policy repo rate has been on hold since October when the RBI lowered it by 25 basis points to 6.25 percent.
Meanwhile, industrial production growth declined to 3.1 percent in April due to poor show by manufacturing, mining and power sectors added with a lower offtake of capital goods and consumer durables. The factory output measured in terms of the index of industrial production (IIP) had expanded by 6.5 per cent in April 2016, the data released by the Central Statistics Office (CSO) today showed. According to the CSO data, the manufacturing sector, which constitutes 77.63 percent of the index, grew at 2.6 percent in April compared to 5.5 per cent in same month last year. The CSO also revised upwards the IIP growth figure for March to 3.75 percent from the provisional estimate of 2.7 per cent released last month.