Inflation declines sharply to 5.96% in March, from 6.84% in the previous month.
“The annual rate of inflation, based on monthly WPI, stood at 5.96 per cent (provisional) for the month of March 2013 (over March 2012) as compared to 6.84 per cent (provisional) for the previous month and 7.69 per cent during the corresponding month of the previous year. Build-up inflation rate in the financial year so far is 5.96 per cent compared to a build-up rate of 7.69 per cent in the corresponding period of the previous year,” the government said in a statement.
An NDTV poll of 10 investments banks had shown that wholesale prices, India’s key inflation measure, likely eased marginally to 6.3 per cent in March 2013 from 6.84 per cent in February.
Reviving investment and economic growth remain the top priority of Prime Minister Manmohan Singh’s government, which is gearing up for national elections due in early 2014.
India’s persistently high food prices irritate voters and have tempered economists’ expectations of aggressive monetary easing.
Retail food prices rose at a slightly slower pace in March, data released last week showed, but were still up 12.46 per cent, a sharp increase at a time economic growth is hovering close to the lowest level in a decade.
The RBI responded to a slight cooling in headline inflation in recent months with two 25 basis point cuts this year to bring the benchmark repo rate to 7.50 per cent in a bid to revive growth. Economists are divided over whether the bank will risk another small cut in borrowing costs next month.
“On the monetary side, the RBI may pause in its next policy (meeting) on May 3, given the elevated inflationary expectations and sharp widening of the current account deficit in the December quarter,” said Aditi Nayar, an economist at ICRA, the Indian arm of rating agency Moody’s.
The current account deficit has re-emerged as India’s weakest economic spot after leaping to an all-time high of 6.7 per cent of GDP in the December quarter. A high current account deficit is potentially inflationary because it can lead to a weaker currency and more expensive imports.
With inputs from Reuters
Source : NDTV Profit