CPI inflation falls to 3.66%, rate cut hopes- Business News

CPI inflation falls to 3.66%, rate cut hopes

With inflation declining to a low of 4.95 per cent in August, experts hope the Reserve Bank must cut the benchmark rate to revive consumer demand

 Jinsy Mathew   
  • September 15, 2015  
  • |  
  • UPDATED   11:51 IST

India's annual consumer price inflation (CPI) for the month of August eased to 3.66% as compared to 3.78% in July, according to the Government data released after market hours.

Retail inflation was a tad higher at 2.20% in August when compared to 2.15% of July.

Earlier in the day, data released by the ministry of commerce and industry showed that wholesale inflation came in the negative territory for the tenth consecutive month at -4.95% in August. This was sharply lower than the -4.05% in July.

Domestic demand showed no signs of revival as core sector continued in the deflation zone. This was the third consecutive month where the index of manufactured products has fallen.Manufactured-product deflation was -1.9% vs. -1.5%.

Food inflation came in at -1.5% vs. -1.4% for the second consecutive month. Deflation in fuel and power was -16.5% and -12.8% respectively.

Non-core deflation gathered pace to -6.9% while Core deflation came in at -3.2%. On a year-to-date basis, deflation was at -3.2%, within which the fuel and & power component is in a -12.1% deflation.

According to Sujan Hajra, Chief Economist at Anand Rathi, "The surprise stemmed from the quickening pace in manufactured-product deflation and a sharp fall in the fuel index. We expect the WPI to continue in deflation in CY15."

The Indian basket of crude-oil prices has slipped in the past three months, mirroring the sharp deflation in fuel during Jun-Aug. Pulses inflation held above 30% for a third straight month. The 65% onion inflation was eclipsed in the -21% vegetable inflation.

Experts believe a decline in consumer price index may lead to rate cut by Reserve Bank of India on 29th September.  Thus far in 2015, RBI has cut rates three times across January, March and June as a move to support the economy. Following suit, most of the major banking players have reduced their base rate.