Inflation softens to 0.48 per cent, rate cut on cards

New Delhi, June 4 (PTI) Inflation declined to 0.48 per
cent for the week ended May 23, giving head room to the
government to initiate expansionary measures and prompt banks
to cut rates.

While the wholesale price index stood at 0.61 per cent
in the previous week, the rate of price rise was 8.90 per cent
during the corresponding week a year ago.

Even though inflation declined during the week, the
prices of essential food items like fruit, tea, cereals,
pulses and spices became more expensive.

In the light of falling inflation, India's Finance
Minister Pranab Mukherjee is holding a meeting with heads of
public sector banks on June 10 to stress further moderation in
interest rates to spur economic growth.

"My Government is firmly committed to maintaining high
growth with low inflation, particularly in relation to prices
of essential agricultural and industrial commodities," India's
President Pratibha Patil said while presenting the agenda of
the second United Progressive Alliance (UPA) government at the
joint session of Parliament.

This is the 12th week in succession when inflation stood
below one per cent.

Meanwhile, ICICI Bank Thursday slashed the benchmark
lending rate by 50 basis points to 15.75 per cent, a move that
would benefit home, consumer corporate loan borrowers.

ICICI Bank has also reduced the floating reference rate
(FRR) applicable to floating rate retail loans including
floating rate home loans by 50 basis points from June 5.

According to HDFC Bank economist Jyotinder Kaur, the
Reserve Bank of India (RBI) might reduce the repo and reverse
repo rates by 25 basis points in its July policy.

From December, there might be reversal of policy by
the central bank, she said.

During the week, the prices of tea went up by 5 per cent
while eggs, maize, arhar and spices were dearer by one per
cent each.

However, the prices of ragi and barley declined by one
per cent each and salt by about 4 per cent.

Among manufactured items, the prices of footwear got
cheaper by one per cent, moulded plastic items by four per
cent and cycle tubes by two per cent. Even airconditioners
prices declined by as much as 9 per cent.

Year-on-year, the prices of cereals went up more than
12.5 per cent, pulses 15.3 per cent, and fruit and vegetables
7.3 per cent. At the same time, the prices of milk have gone
up nearly 6.4 per cent over last year, while spices were more
expensive, by about 8.4 per cent.

Among manufactured food products, processed fish turned
dearer by more than 42.7 per cent over last year.

Inflation for the week ended March 28 was revised upwards
to 0.84 per cent from 0.26 per cent, as estimated
provisionally. PTI DP
RAI