The Reserve Bank of India has said that it would take note of falling inflation while deciding on policy initiative in its review next month.

“We will certainly take note of the softening of inflation and the external payments situation in the next mid-quarter policy statement on June 17,” RBI Governor Subbarao had said at an event in Frankfurt yesterday.

He said that he was happy to see inflation coming down to below 5 per cent mark.

WPI inflation

The headline wholesale inflation fell to a 41-month low in April, within the central bank’s comfort zone of less than 5 per cent and fuelling market hopes for more monetary easing to revive the sagging economic growth.

RBI is scheduled to announce its mid-quarter review of monetary policy for 2013-14 on June 17.

WPI inflation eased to 4.89 per cent in April on account of decline in the prices of food items, including fruits and vegetables. It stood at 5.96 per cent in March.

In April 2012, it was 7.5 per cent. April recorded the lowest level of inflation since November 2009 when it was 4.78 per cent.

Encouraged by the declining trend in inflation, the Finance Ministry made a case for further rate cut by RBI to boost the sagging growth.

“I think we need to look at a statement made by RBI Governor during the last policy review, where he had stated that RBI is closely monitoring inflation figures and if there is dramatic change in inflation figures, then RBI will take that into consideration during its next review,” Department of Economic Affairs Secretary Arvind Mayaram had said in New Delhi yesterday.

In order to accelerate economic growth, RBI earlier this month had cut key interest rates by 0.25 per cent.

The central bank lowered the short-term lending (repo) rate to 7.25 per cent from 7.50 per cent, lowest since May 2011, while retaining the Cash Reserve Ratio for banks unchanged at 4 per cent.

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