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Sunday, December 15, 2019

Inflation back in RBI’s ‘comfort zone’

Headline inflation falls to 4.89% in April,the lowest since November 2009

Written by ENS Economic Bureau | New Delhi | Published: May 15, 2013 1:52:06 am

The headline inflation fell to 4.89 per cent in April,its lowest since November 2009,fuelling hopes that the Reserve Bank of India may further ease the monetary policy to revive economic growth rate that fell to 5 per cent last fiscal,the lowest in a decade.

The wholesale price index (WPI)-based inflation,which was at 7.5 per cent in April 2012 and at 5.96 per cent in March 2013,is now back in the Reserve Bank of India’s comfort zone (below 5 per cent) after more than three years,official data showed on Tuesday.

The sharper-than-expected decline in WPI-based inflation was helped by the fall in not only food and fuel prices,but also by an easing of demand pressures in the economy as reflected in the decline of non-food manufacturing inflation or core inflation to an annual 2.77 per cent in April.

Core inflation,the main gauge for the RBI currently to assess demand pressures,has been on the decline in recent months and stood at 3.5 per cent in March.

Encouraged by declining inflation,the finance ministry made a case for further rate cut by the RBI to boost growth.

“… We do believe that RBI would look at this figure (April inflation),” department of economic affairs secretary Arvind Mayaram said.

Meanwhile,RBI Governor D Subbarao,when asked about potential interest rate cuts in light of falling inflation,was quoted by Reuters as saying that they would be taken into account and in future central bankers “will take note of softening inflation”. Subbarao had earlier said that he was “very happy” about the fall.

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