Sandrine Rastello Mumbai
INDIA’S retail inflation unexpectedly slowed despite crop damage from unseasonal rains, boosting the possibility that central bank governor Raghuram Rajan would cut rates outside the review cycle for a third time this year.
Consumer prices rose 5.17 percent last month from a year earlier after a 5.37 percent increase in February, the statistics ministry said in a statement in New Delhi. The median of 38 estimates in a survey of economists had predicted a 5.41 percent gain.
Rajan refrained from lowering borrowing costs at a scheduled review last week as he waited for commercial lenders to pass on two previous cuts to customers.
He said his next move would depend on data that showed the balance of risks to inflation, which he was mandated to keep below 6 percent by January.
“If there’s no very adverse impact on food and vegetable prices, inflation this year is going to remain benign,” Devendra Kumar Pant, the chief economist at India Ratings & Research, the local unit of Fitch Ratings, said before the data.
He predicts Rajan will cut the repurchase rate to 7 percent by the end of March next year, from 7.5 percent now.
While’s India’s inflation has slowed from an average of 6.7 percent last year, its still the second-fastest in Asia after after Indonesia.
Unseasonal rains and hailstorms this year had damaged crops including wheat, rapeseed and gram in 11.3 million hectares, Agriculture Minister Radha Mohan Singh said last week.
Wheat production might fall as much as 5 percent this year from a near-record 95.8 million tons estimated by the government in February, he said.
While the Reserve Bank of India could not control food inflation, it looked to prevent it from spiralling, Rajan said on Friday. – Bloomberg