March logs 3-month low inflation; renews demand for rate cut

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New Delhi | Updated: April 13, 2015 10:06:11 PM

Easing of food prices, mainly milk and vegetables, pulled down the March retail inflation to 3-month low of 5.17 per cent...

Inflation, retail inflation, income, spending, shopping, inflation in india, inflation rate in india, consumers, shopping spendings, Indian economy, oil prices, food prices, business news, india news, consumer price indexThe retail inflation as measured by Consumer Price Index was 5.37 per cent in February, and 5.19 per cent in January. (Reuters)

Easing food prices pulled down retail inflation in March to a 3-month low of 5.17 per cent despite unseasonal rains, renewing industry clamour for further cut in RBI policy rate to boost growth.

Retail inflation as measured by Consumer Price Index was 5.37 per cent in February, and 5.19 per cent in January. It was 8.25 per cent in March last year, government data released today said.

The easing prices of milk, vegetables and fruits brought down the overall food inflation to 6.14 per cent in March, from 6.79 per cent recorded in February.

After cutting rates twice this year, in its first bi-monthly monetary policy announcement in the new fiscal, the Reserve Bank had kept the key policy rate unchanged on fears of unseasonal rains impacting food prices.

Industry body CII’s Director General Chandrajit Banerjee said inflation continues to remain moderate and has in fact declined when compared to the previous month.

“This should persuade the RBI to resume its rate easing cycle to support growth without being too concerned about the impact on inflation,” he said.

Anis Chakravarty, Senior Director with Deloitte in India, said the decline in retail inflation is a “positive development… Despite the unseasonal rains, food inflation declined (month-on-month)”.

The decline in inflation, he said, “reinforces the view that further monetary easing is imminent”.

Retail inflation declined for ‘cereals and products’, although it was up in the case of protein rich items like ‘meat and fish’.

The rate of price rise in the food and beverages segment as a whole was 6.2 per cent in March, lower than 6.76 per cent in the previous month.

The CPI-based retail inflation has been calculated with a new base year of 2012.

Inflation in the fuel and light segment was 5.07 per cent last month, up from 4.72 per cent in February.

In the housing segment, inflation was 4.77 per cent last month, as compared to 4.98 per cent.

For the rural segment, the overall retail inflation was 5.58 per cent in March and 4.75 per cent for urban centres.

“Stability in retail inflation would help strengthening of macroeconomic system and pave the way for soft monetary policy environment, going forward,” PHD Chamber of Commerce President Alok Shriram said.

In its comments, ICRA said if the monsoon is normal and crude oil prices do not post a significant rebound, CPI inflation is expected to average 5.5 per cent in 2015, “limiting future repo rate cuts to 50 bps over the remainder of 2015”.

To calculate the CPI, price data are collected from selected towns by the field operations division of NSSO and from selected villages by the Department of Posts.

Softer inflation gives RBI room to cut rate: Industry

The fall in retail inflation in March to a 3-month low of 5.17 per cent provides leeway to the Reserve Bank (RBI) to resume its rate-cutting cycle, India Inc said today.

“This should persuade the RBI to resume its rate-easing cycle to support growth without being too concerned about the impact on inflation,” CII Director General Chandrajit Banerjee said.

“Notwithstanding, the bad weather conditions in March, the fall in CPI inflation, that too led by deceleration in the prices of fruits and vegetables, is inspiring and indicative of improved supply side conditions in the country,” PHD Chamber of Commerce President Alok Shriram said.

“Stability in retail inflation would help strengthening of macroeconomic system and pave the way for soft monetary policy environment, going forward,” Shriram added.

The RBI has lowered interest rates by a total of 0.50 per cent since January 2015 outside the policy cycle this year.

However, in its latest policy review on April 7, RBI Governor Raghuram Rajan kept repo rate unchanged, awaiting clarity on impact of unseasonal rains on food inflation even as he wanted banks to pass on benefits of the previous two rate cuts.

Easing of food prices, mainly milk and vegetables, pulled down the March retail inflation.

The retail inflation as measured by Consumer Price Index was 5.37 per cent in February, and 5.19 per cent in January. It was 8.25 per cent in March last year.

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