Food prices are still high
The headline inflation for May dropped to a 42-month low of 4.7 per cent, raising hopes of an interest rate cut by the Reserve Bank of India on Monday.
The Wholesale Price Index (WPI)-based inflation — the main gauge of inflation in India — in May was lower than the 4.89 per cent in April and 7.55 per cent in May 2012.
The decline in inflation rate and firm global cues brought cheer to the stock market, with the benchmark Sensex climbing 353 points on Friday.
Planning Commission Deputy Chairman Montek Singh Ahluwalia hoped the RBI would factor in the distinct downturn in inflation, and for the fourth straight month, while deciding on the interest rate on Monday.
“They (the RBI) should certainly consider it (easing) as the underlying inflationary pressure is softening,” Ahluwalia said.
The softening in headline inflation was largely led by a decline in the prices of manufactured items even as those of food articles inched up. The prices of manufactured items declined to 3.11 per cent in May from 3.41 per cent in April.
The good news is that the non-food inflation has come down sharply from 7.59 per cent in April to 4.88 per cent in May.
Food prices rise
Food inflation rose to 8.25 per cent in May from 6.08 per cent in April. This surge was mainly on account of an increase in the prices of onions, vegetables, cereals and protein-based items. Vegetable prices rose 4.85 per cent against the decline of 9.05 per cent last month.
Headline inflation for March 2013 has now been lowered to 5.65 per cent from 5.96 per cent earlier, official data released on Friday showed.
While WPI-based inflation has been showing a softening trend, retail inflation has been more than double the WPI rate.
For May 2013, retail inflation came in at 9.31 per cent, which was lower than 9.39 per cent in March. However, food inflation was higher even in consumer price index-based data.