The wholesale price index (WPI)-based inflation for April dropped to a 41-month low of 4.89 per cent, giving RBI some headroom to extend its monetary easing and support growth.

The April inflation is substantially lower than the WPI-inflation level of 5.96 per cent in March. It is also lower than the April 2012 WPI-inflation of 7.50 per cent.

In fact, the April 2013 WPI inflation had the slowest pace since November 2009 when it had touched 4.78 per cent.

Encouraged by the sharp slide in WPI inflation, Economic Affairs Secretary Arvind Mayaram expressed confidence that the Reserve Bank of India would factor in the moderation in headline inflation rate while reviewing policy stance.

“If you look at the RBI Governor’s policy statement, he has very clearly stated that he will be watching inflation closely and if there are changes that indicate the space for review, the RBI will take that into consideration,”Mayaram told reporters here.

He also felt that inflation would continue to moderate in the next month (May) as well.

Mayaram also said that he expected the consumer price index (CPI) to come down even further in the coming days on the back of lower food prices. It was already below 10 per cent, he added.

Retail inflation for April had come in at 9.39 per cent, lower than the 10.39 per cent level in the previous month.

The Commerce and Industry Ministry on Tuesday also revised the February 2013 WPI-inflation rate to 7.28 per cent from 6.84 per cent announced earlier.

Planning Commission Deputy Chairman Montek Singh Ahluwalia said the pressure on inflation was softening and he expected this trend to continue in the next few months. He felt that a five per cent level of inflation was quite acceptable.

While reducing the policy rate by 25 basis points on May 3, RBI Governor D. Subbarao had signalled that there was little space for further monetary easing. He had cited the difficult current account deficit situation and the possibility of pricing pressures returning.

RBI has so far this year cut its policy rates thrice. There are indications of a further 75 basis point cut in the repo rate during the remaining months of this fiscal, say economists.

The moderation in WPI-inflation for April led to a six basis point fall in the yield of the 10-year Government securities due in June 2022, to 7.52 per cent.

The RBI had recently described the current-account deficit as “by far the biggest risk to the economy”.

On Monday, RBI restricted the import of gold on consignment basis by banks, stipulating that they could do so only to meet the genuine needs of exporters of gold jewellery.

Bulk of the gold imported by nominated banks is on consignment basis whereby these banks do not have to fund these stocks.

srivats.kr@thehindu.co.in

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