India Inc seeks rate cut as inflation falls further in April

Wholesale prices fell for the sixth consecutive month in April dragging down the inflation rate to a record low of (-)2.65 per cent in April prompting India Inc to strengthen its case for an interest rate cut by the Reserve Bank of India (RBI) in its policy review next month.

Inflation, as measured on the wholesale price index (WPI), has been in the negative zone since November 2014. It was was 5.55 per cent last April. When asked if he expects the RBI to cut rates at its June 2 monetary policy review, Union Finance Minister Arun Jaitley said, "I expect what every Indian expects."

Official figures released on Thursday showed that the prices of manufactured products fell by 0.52 per cent during April. Inflation in food articles category stood at 5.73 per cent as against 6.31 per cent in March. Fuel and power inflation was (-)13.03 per cent in April. Potato prices saw the steepest fall of (-)41.14 per cent in April. For vegetables, the decline was (-)1.32 per cent.

The February WPI inflation has been revised downwards to (-)2.17 per cent as against the provisional estimate of (-)2.06 per cent. Inflation in pulses was up at 15.38 per cent, and for egg, meat and fish at 4.01 per cent.

Icra senior economist Aditi Nayar said: "The data reinforces our expectation of a high probability of 0.25 per cent rate cut in the RBI policy on June 2."

India Inc has also renewed its demand for a rate cut.

Confederation of Indian Industry Director General Chandrajit Banerjee said: "The benign inflation outlook ... should provide sufficient elbow room to the RBI to continue with growth inducing policy in its forthcoming monetary policy announcement."

RBI has reduced repo rate by 0.5 per cent since January as inflationary pressures eased. However, it did not change the rate in its April 7 policy review as RBI Governor Raghuram Rajan has been giving precedence to controlling inflation. He also wants banks to pass on the earlier reduction in interest rates.

Consumer price index-based inflation data, released earlier this week, showed retail inflation fell to a four-month low of 4.87 per cent in April on account of easing food prices.