New Delhi: India's consumer price inflation eased to 4.8 percent in March year-on-year, the statistics ministry said Tuesday, bolstering the Reserve Bank of India's recent decision to cut interest rates. The drop in the inflation rate from a revised 5.3 per cent in February shows prices rising at their slowest pace in six months, giving the central bank more room to stimulate the economy.
India's central bank last week cut its key interest rate to a five-year low of 6.5 per cent citing softening inflation, and signalled there could be further rate cuts to come. "Inflation is now below the RBI's 5 per cent target for March 2017. Alongside last week's cut in the repo rate, this may fuel talk of further monetary loosening," said Shilan Shah, India Economist at Capital Economics.
In another piece of good news for the Indian economy, industrial output expanded in February after contracting for three months in a row, figures released by the statistics ministry Tuesday showed. The Index of Industrial Production, which measures growth in economic sectors including mining, metals and electricity, increased two percent compared with the same month a year before.
The RBI last week said it would lower the benchmark repo rate, the level at which it lends to commercial banks, by 25 basis points down from 6.75 per cent. The widely expected cut, designed to lower the cost of borrowing and investing to provide a boost to consumers and the economy, takes the key interest rate to its lowest level since early 2011.
