While rural retail inflation rate slowed to 5.58% in March from 5.79% a month ago, urban retail inflation rate eased to 4.75% in March from 4.95% in February. Photo: Indranil Bhoumik/Mint
New Delhi: India's retail inflation surprisingly eased in March to 5.17% from 5.37% a month ago as food prices softened, despite the damage to spring harvest in more than 14 states following unseasonal rainfall and hailstorms in March and first week of April.
Food inflation slowed to 6.14% in March from 6.88% a month ago.
While rural retail inflation rate slowed to 5.58% in March from 5.79% a month ago, urban retail inflation rate eased to 4.75% in March from 4.95% in February.
The Reserve Bank of India (RBI) kept its benchmark policy rate unchanged at 7.5% on 7 April, and said it would wait for banks to pass on rate cuts that have already been announced before further easing.
Some of the biggest banks in India have pared their base rate marginally.
"CPI inflation is projected at its current levels in the first quarter of 2015-16, moderating thereafter to around 4% by August but firming up to reach 5.8% by the end of the year," RBI governor Raghuram Rajan said in the first monetary policy statement of the new financial year.
RBI had unexpectedly reduced the policy rate by 25 basis points on 4 March, the second cut outside a scheduled monetary policy review since January. The first rate cut of the cycle was announced on 15 January. A basis point is one-hundredth of a percentage point.
Rajan in his statement cautioned that there are upside risks to the central projection emanating from possible intensification of El Niño conditions leading to a less than normal monsoon; large deviations in vegetable and fruit prices from their regular seasonal patterns, given unseasonal rain; larger than anticipated administered price revisions; faster closing of the output gap; geo-political developments leading to hardening of global commodity prices; and spillover from external developments through exchange rate and asset price channels.
"However, at this juncture, these upside risks appear to be offset by downsides originating from global deflationary/disinflationary tendencies, the still soft outlook on global commodity prices; and slack in the domestic economy," he added.
The chances of El Nino, which is strongly associated with lower rainfall in India's monsoon season, has risen to 70%, the US government's weather forecaster said on Thursday. The US National Oceanic Atmospheric Administration in its earlier advisory in March had predicted 50% chance of El Nino continuing in the northern hemisphere summer, which was in line with the forecast of the Australian Bureau of Meteorology.
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