Cheaper veggies down March inflation to 5.96%

Pressure mounts on RBI to consider rate cut in its next policy meet

New Delhi (PTI): Giving some relief to common man, softening vegetable prices pulled down inflation to over 3-year low of 5.96 per cent in March, raising hopes of rate cut next month by the Reserve Bank to boost economic growth. This is the lowest level of Wholesale Price Index (WPI) inflation since December 2009 when it was 4.95 per cent.

Inflation based on the WPI stood at 6.84 per cent in February. In March 2012, it was 7.69 per cent. Food inflation, which has 14.34 per cent share in the WPI basket, declined to 8.73 per cent in March from 11.38 per cent in February. Easing of food inflation was on account of a sharp drop in prices of vegetables. Inflation in vegetables stood (-)0.95 per cent in March, from 12.11 per cent in the previous month.

Commenting on the inflation numbers, Planning Commission Deputy Chairman Montek Singh Ahluwalia said inflationary pressure is coming down gradually. "Inflation behaviour is consistent with what government has been saying that it is slowly coming under control," he said.

Experts said WPI has come down mainly on easing of fruits and vegetable prices, but retail inflation continues to be in double digit as food inflation remains structurally high.

Inflation for January, however, was revised upwards to 7.31 per cent, from 6.62 per cent provisionally. The decline in March inflation and a slowdown in industrial output growth to 0.6 per cent in February raised expectations of rate cut by RBI to boost growth. RBI will announce its annual policy on May 3. The 5.96 per cent March-end inflation is much lower than the Reserve Bank's projection of 6.8 per cent.

"Near one percentage point drop in the inflation has come as a big relief to the industry and as a pointer to the RBI to reverse its hawkish policies and cut the interest rates rather aggressively," said Rajkumar Dhoot, President, Assocham.