At 4.83%, March CPI inflation dips below the 5% mark

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New Delhi | Updated: April 12, 2016 6:01 PM

The Consumer Price Index (CPI) inflation for the month of March declined to 4.83% versus 5.18% in the month of February. This is much below consensus estimates of most analysts.

inflation, rbiThe Consumer Price Index (CPI) inflation for the month of March declined to 4.83% versus 5.18% in the month of February. This is much below consensus estimates of most analysts. (Reuters)

The Consumer Price Index (CPI) inflation for the month of March declined to 4.83% versus 5.18% in the month of February. This is much below consensus estimates of most analysts.

Both rural and urban inflation declined, with the former declining to 5.70% versus 6.05% in February, and latter coming at 3.95% versus 4.30% in February. Pulses inflation dipped substantially to 34.15% versus 38.30% in February.

Last week, RBI governor Raghuram Rajan said that inflation has evolved along the projected trajectory and the target set for January 2016 was met with a marginal undershoot. “Going forward, CPI inflation is expected to decelerate modestly and remain around 5% during 2016-17 with small inter-quarter variations,” said Rajan in the central bank’s monetary policy review.

Rajan cautioned that there are uncertainties surrounding this inflation path emanating from recent unseasonal rains, the likely spatial and temporal distribution of monsoon, the low reservoir levels by historical averages, and the strength of the recent upturn in commodity prices, especially oil.

However, in news that will bring cheer, the India Meteorological Department (IMD) has forecast an above normal monsoon this year. “Quantitatively, the monsoon seasonal rainfall is likely to be 106% of the Long Period Average (LPA) with a model error of ± 5%,” says IMD. IMD will issue the update forecasts in June as a part of the second stage forecast.

The prediction comes at a time when the rural economy is in distress owing to two consecutive years of below-par monsoon or drought. The government’s Budget for the current financial year has also focused on alleviating this very distress that is plaguing the rural economy.

RBI’s Rajan is of the opinion that after two consecutive years of deficient monsoon, a normal monsoon would work as a favourable supply shock, strengthening rural demand and augmenting the supply of farm products that also influence inflation.

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