New Delhi, Apr 15: Providing some relief to common man, softening vegetable prices pulled down inflation to over 3-year low of 5.96 per cent in March, raising hopes of rate cut next month by the Reserve Bank to boost economic growth.
This is the lowest level of Wholesale Price Index (WPI) inflation since December 2009 when it was 4.95 per cent.
Inflation based on the WPI stood at 6.84 per cent in February. In March 2012, it was 7.69 per cent.
Food inflation, which has 14.34 per cent share in the WPI basket, declined to 8.73 per cent in March from 11.38 per cent in February.
Easing of food inflation was on account of a sharp drop in prices of vegetables. Inflation in vegetables stood (-)0.95 per cent in March, from 12.11 per cent in the previous month.
Commenting on the inflation numbers, Planning Commission Deputy Chairman Montek Singh Ahluwalia said inflationary pressure is coming down gradually.
“Inflation behaviour is consistent with what government has been saying that it is slowly coming under control,” he said.
Experts said WPI has come down mainly on easing of fruits and vegetable prices, but retail inflation continues to be in double digit as food inflation remains structurally high.
“The easing has happened on account of a significant decline in global commodity prices in March and growing deflationary trends in manufacturing sector. I expect RBI to reduce both the repo rate and CRR by 0.25 per cent,” Bank of Baroda Chief Economist Rupa Rege Nitsure said.
Inflation for January, however, was revised upwards to 7.31 per cent, from 6.62 per cent provisionally.
The decline in March inflation and a slowdown in industrial output growth to 0.6 per cent in February has raised expectations of rate cut by RBI to boost growth. RBI will announce its annual policy on May 3. The 5.96 per cent March-end inflation is much lower than the Reserve Bank's projection of 6.8 per cent.
“Near one percentage point drop in the inflation has come as a big relief to the industry and as a pointer to the RBI to reverse its hawkish policies and cut the interest rates rather aggressively,” said Rajkumar Dhoot, President of the industry body Assocham.
Inflation in the manufactured items category witnessed a marginal decline at 4.07 per cent in March. It was 4.51 per cent in February.
The rate of price rise of onions was 94.85 per cent for the month of March, as against the inflation rate of 154.33 per cent in February.
Inflation in rice prices eased to 17.90 per cent in March, as against 18.84 per cent in the previous month.
The stock markets reacted positively to the inflation number and the BSE 30-stock index, Sensex, closed 115.24 points higher at 18,357.80.
The RBI has cut interest rates twice in 2013 by 0.25 per cent each to promote growth but cautioned that rate cut in the future would depend on moderation in inflation.
Industry has been demanding a rate cut to boost growth which is estimated to have fallen to a decade's low level of 5 per cent in 2012-13 fiscal.
The government is taking steps to cool inflation by easing supplying side constraints, besides trying to attract investment to increase productivity.
