India’s annual Wholesale Price Index (WPI) inflation for the month of April fell to 3.85% from 5.70% in March, while the annual Consumer Price Index (CPI) inflation for April fell to 2.99% from 3.81% in March. The annual Index of Industrial Production (IIP) for March rose 2.7% from 1.9% in Feb. The government has also changed the base year for IIP calculation to 2011-2012 from the earlier 2004-2005.
Earlier Bank of America Merrill Lynch (BofA-ML) had forecasted that the April CPI inflation is expected to slip to 3.2 per cent from 3.8 per cent in March, well within the RBI’s 2-6 per cent target. The global financial services major had also said that food prices are likely to fall on a good summer rabi harvest and this, in turn, is expected to bring CPI inflation down.
“We expect April CPI inflation to slip to 3.2 per cent from 3.8 per cent in March – well within the RBI’s 2-6 per cent target – on falling food inflation,” BofA-ML said in a research note.
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According to Government data, retail inflation had jumped to a five-month high of 3.81 per cent in March, while inflation based on wholesale price index (WPI) slipped to 5.70 per cent.
Indian shares ended lower on Friday, after jumping to record highs twice this week, as investors turned cautious ahead of inflation data and booked profits in recent outperformers. The broader NSE index closed down 0.23 percent at 9,400.90 but was up 1.24 percent for the week. The benchmark BSE index ended 0.21 percent lower at 30,188.15 but was up 1.10 percent for the week. Both indices snapped four straight sessions of gains.
On RBI’s policy stance, the BofA-ML report had said that the central bank may go for a 25 bps rate cut in its August policy review. The global brokerage firm cited three reasons for an August rate cut — April inflation is likely to slip to 3.2 per cent, a receding El Nino could lead to a good monsoon and oil imported inflation fears are also receding.
The Reserve Bank in its monetary policy review meet on April 6 kept the repurchase or repo rate — at which it lends to banks — unchanged at 6.25 per cent but increased reverse repo rate to 6 per cent from 5.75 per cent.