Inflation at 43-month low of 4.7%; scope for rate cut by RBI

Last Updated: Fri, Jun 14, 2013 11:25 hrs

Declining prices of manufactured goods helped inflation ease to three-and-a-half year low of 4.7 per cent in May, providing leeway to the Reserve Bank to cut interest rates in its policy review on Monday so as to spur growth.

Falling for the fourth straight month, inflation reached the lowest level since November 2009 when it was 4.50 per cent.

Inflation based on the Wholesale Price Index (WPI) stood at 4.89 per cent in April. In May 2012, it was 7.55 per cent.

Inflation in food articles category, which has 14.34 per cent share in the WPI basket, however, rose to 8.25 per cent in May. It was at 6.08 per cent in April.

Manufacturing inflation declined to 3.11 per cent in May from 3.41 per cent in April.

Commenting on inflation figures, Planning Commission Deputy Chairman Montek Singh Ahluwalia said it indicates a distinct downturn on inflation which is welcome.

"They (RBI) should certainly consider it because it is very clear that the underline inflationary pressure is softening," he added.

Industry chamber Ficci demanded that RBI should consider a rate cut and persuade banks to pass on rate cut benefits to borrowers. "With the downward trend in the prices holding on, RBI can consider a cut in the policy rate in the forthcoming monetary policy review," it said.

Commenting on inflation numbers, Finance Ministry officials said they want lower interest rates and monetary policy transmission.

Analysts, however, were of the view that it may be difficult for the Reserve Bank to cut rates in view of the sharp decline in the value of the rupee against the US dollar. MORE

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