Declining price of vegetables pulled down inflation to over three-year low of 5.96 per cent in March, core inflation moderated to 3.5 per cent and food price inflation also eased to 8.2 per cent, which is likely to prompt the RBI to consider a rate cut in its annual monetary policy next month.
Inflation based on the Wholesale Price Index (WPI) stood at 6.84 per cent in February. In March, 2012, it was 7.69 per cent.
According to Morgan Stanley, high government deficit and strong growth in rural wages (which is growing at around 20 per cent year-on-year for last three years) are key factors keeping inflation expectations high.
Inflation data for June has not brought any cheer to the markets. From this data, the possibility of a rate cut is negligible. Deficient monsoons and higher food prices would make any rate action difficult.
Retail inflation measured by the consumer price index has risen sharply across food and non-food constituents, including services, keeping inflation expectations high, the Reserve Bank of India said in its Second Quarter Review of Monetary Policy 2013-14.
The benchmark indices ended higher on Tuesday, amid firm global cues, led by banks as lower inflation in July raised hopes of a rate cut by the central bank. Gains in index heavyweight Reliance Industries also boosted sentiment. The Sensex ended at 17,728, up 95 points and the 50-share Nifty jumped 32 points to close at 5,380.
The key short-term lending rate (repo rate)has been hiked by 0.25 pc to 7.50 pc.
With the average WPI-based inflation at 7.5% and CPI-based one above 10%, a bit of aggression is required to beat inflation. Four experts give their views.
RBI Governor Raghuram Rajan is regarded as credible by global financiers.
Inflation moved up to 7.23 per cent in April on account of spurt in prices of vegetables, meat, milk and pulses, although onion and fruits showed a declining trend.
Soft crude prices will cut fuel subsidy bill and help contain fiscal slippage this year.
In the mid-quarter review on December 18, the Reserve Bank left key policy rates unchanged but said it will hike interest rates if inflation does not subside.
The latest numbers are the lowest since December 2009 when headline inflation was at 7.15 per cent.
Overall, vegetables were 47.06 per cent cheaper during the week under review, from the same period last year.
The common man will get no respite from rising prices for another six months, with the government on Wednesday saying that inflation, currently hovering above 9 per cent, will continue to remain high till December.
There are glaring anomalies with Indian data and that could lead to wrong policy prescriptions.
Inflation, as measured by the Wholesale Price Index, was 7.55 per cent in May. In June last year, it was 9.51 per cent.
Food inflation is back in double digits after a gap of a month-and-a-half and stood at 10.60 per cent for the week ending October 8 on the back of costlier vegetables, fruits, milk and protein-based items.
Food inflation remained in the negative zone for the third straight week, at (-)0.42 per cent for the week ended January 7, mainly due to fall in prices of onion and vegetables.
Food prices fell for the second consecutive week as food inflation remained in the negative zone at (-)2.90 per cent for the week ended December 31, 2011.
Tata Motors was the top Sensex loser, down nearly 5%
Overall food inflation rose to 10.74 per cent in May, from 10.49 per cent in the previous month. Food articles have 14.3 per cent share in the WPI basket.
Food inflation fell sharply to a near four-year low of 1.81 per cent for the week ended December 10 as prices of essential items like vegetables, onion, potato and wheat declined.
After fighting inflation for more than two years, Reserve Bank of India (RBI) Governor Duvvuri Subbarao finally managed to bring it below the five per cent level - the tolerance level of the central bank - in FY14.
Eggs, meat and fish also became 13.36 per cent more expensive on an annual basis, while cereal prices were up 4.13 per cent.
The wholesale price index inflation is projected at 6.4 per cent for 2017-18.
The March Wholesale Price Index-based inflation was at (-) 0.85 per cent.
Unabated buying by domestic institutional investors and wholesale price inflation falling to 2.60 per cent in September, helped both the key indices to scale new highs.
During the week ended August 13, fruits became dearer by 27.01 per cent and eggs, meat and fish by 13.37 per cent on an annual basis.
On an annual basis, prices of food articles went up by 8.19 per cent in July, which is lower than the 8.38 per cent inflation recorded in June.
RBI's unique focus on WPI inflation is misguided even as demand-driven factors have become relatively less important.
Ahead of the monetary policy review on May 3, Reserve Bank of India (RBI) Deputy Governor Shyamala Gopinath said inflation was a concern, mainly on account of the high prices of non-food manufacturing goods.
The finance ministry and RBI must get less conservative and improve co-ordination.
The Reserve Bank of India (RBI) kept its key policy repo rate unchanged at 8.0 percent on Tuesday, as widely expected, while expressing concerns about risks to its target to bring consumer inflation down to 6 percent by January 2016.
Headline inflation rose to 9.44 per cent in June on the back of rising prices of fuel and manufactured products, which may prompt the Reserve Bank to raise key rates again in its quarterly policy review later this month.
As per data released by the government on Thursday, pulses became over 9 per cent cheaper year-on-year during the period under review.
The whole price index, used to measure rise in prices of a range of products in a consumer basket, stood at 9.06 per cent in May.
RBI is closely monitoring monsoon.
Infosys, Tata Motors, ONGC, TCS and GAIL are the top 5 losers.
Benchmark share indices opened lower on Monday, amid weak global cues, as investors turned cautious ahead of the US Federal Reserve stance on interest rate.
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