Inflation eases to 4.7 percent in May; raises rate cut hope

New Delhi  :  India’s wholesale price-based inflation fell to 4.7 percent in May, the lowest in 43 months, on softening in prices of manufactured as well as primary articles, government data showed Friday.

The country’s main inflation indicator based on Wholesale Price Index (WPI) was recorded at 4.89 percent in April and 7.55 percent in the corresponding month of last year.

Softening in inflationary pressure has boosted hopes of a rate cut when the Reserve Bank of India (RBI) reviews policy Monday.

Inflation for March was revised downward at 5.65 percent from 5.96 percent reported earlier, according to data released by the ministry of commerce and industry here.

Reacting on the data, Planning Commission Deputy Chairman Montek Singh Ahluwalia said the monthly figures were better than what the government had expected.

“I think it does indicate that there is distinct downturn on inflation which is welcome,??? Ahluwalia told reporters.

On possibility of rate cuts, Ahluwalia said: “They (RBI) should certainly consider it because it is very clear that the underline inflationary pressure is softening.”

This is the fourth straight month of easing in the country’s headline inflation. The consistent decline in inflation will give room to the central bank to further ease monetary policy.

The RBI is scheduled to review the monetary policy June 17. The central bank had cut interest rates in all the last three policy review.

“With the downward trend in the prices holding on, RBI can consider a cut in the policy rate in the forthcoming monetary policy review,??? said Naina Lal Kidwai, president, Federation of Indian Chambers of Commerce and Industry (FICCI).

Slower increase in the prices of manufactured as well as primary articles have helped in easing of inflationary pressure in the recent months.

Inflation of manufactured products declined to 3.11 percent in May, while primary articles inflation eased to 6.65 percent. Food inflation declined to 8.25 percent.

Fuel and power inflation stood at 7.87 percent in the month under review.

As per the Central Statistics Office (CSO) data released earlier this week, retail inflation based on Consumer Price Index (CPI) declined to 9.31 percent in May as compared to 9.39 percent in the previous month and 10.39 percent recorded in March.

Build-up inflation rate in the first two months of the current financial year is 0.88 percent as compared to build-up rate of 1.80 percent in the corresponding period of the previous year, the commerce and industry ministry said in a statement.

Prices of some items like petrol, potato, metal and iron declined in May year-on-year.

Petrol became cheaper by 4.43 percent. Potato price declined by 3.44 percent. Basic metal and metal products became cheaper by 1.50 percent and iron became cheaper by 7.29 percent.

Prices of most fruits and vegetables increased at a slower rate. However, onion price almost doubled — jumping by 97.40 percent year-on-year during the month under review.

Cereals became costlier by 16.01 percent. Price of rice rose by 18.48 percent and wheat became costlier by 12.65 percent.