New Delhi: Deflationary pressure persisted for the sixth month in a row as fall in prices of fuel and manufactured items pulled inflation to a new low of (-)2.65 percent in April, prompting industry to demand a rate cut by the Reserve Bank.
Inflation, as measured on the Wholesale Price Index (WPI), has been in the negative zone since November, 2014. In April last year, it was 5.55 percent.
The deflationary trend has bolstered the case for a rate cut by RBI as retail inflation has also eased and industrial production is down, experts said.
When asked if he expects the RBI to cut rates at its June 2 monetary policy review, Finance Minister Arun Jaitley said: "I expect what every Indian expect."
As per the data released today, manufactured products witnessed deflation for the second consecutive month in April as inflation dropped to a record low of (-)0.52 percent.
Inflation in food articles category stood at 5.73 percent, as against 6.31 percent in March. Fuel and power inflation was (-)13.03 percent in April.
Industry chambers raised clamour for lower interest rates, saying the data provides ample space for RBI to slash the key policy rate to fuel investments and propel growth.
ICRA Senior Economist Aditi Nayar said: "The data reinforces our expectation of a high probability of 0.25 percent rate cut in June 2 RBI policy."
The February WPI inflation has been revised downwards to (-)2.17 percent as against the provisional estimate of (-)2.06 percent.
On the macro economic condition, Jaitely said it has improved. "Economy is in a recovery stage. Inflation is under control, growth is better, fiscal deficit, current account deficit is under control... From despondency we have entered a positive zone."
As per the WPI data, potato prices saw the steepest fall of (-)41.14 percent in April. For vegetables, the decline was (-)1.32 percent.
However, inflation in pulses was up at 15.38 percent, and for egg, meat and fish at 4.01 percent.
Some experts cautioned that a poor monsoon could stoke food inflation in the months to come.
"Going forward, we expect the fiscal and monetary authorities to be vigilant on the food price front as the threat of another bad monsoon season looms large," Deloitte (India) Senior Director Anis Chakravarty said.
For the second successive year, monsoon is likely to be below normal in the current year at 93 percent, as parts of north-west and central India may be the most affected, according to an official forecast.
Commenting on the inflation data, CII Director General Chandrajit Banerjee said: "The benign inflation outlook... should provide sufficient elbow room to the RBI to continue with growth inducing policy in its forthcoming monetary policy announcement."
RBI has reduced repo rate by 0.5 percent since January as inflationary pressures eased. However, it did not change the rate at its April 7 policy.
WPI inflation was (-)2.33 percent in March, (-)2.17 percent in February, (-)0.95 percent in January, (-)0.50 percent in December and (-)0.17 percent in November.
The Consumer Price Index based inflation data, released earlier this week, showed retail inflation fell to a 4-month low of 4.87 percent in April on account of easing food prices.
Industrial output growth slowed to a 5-month low of 2.1 percent in March.
