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Retail inflation accelerates to 8.59% in April

LiveMint logoLiveMint 12-05-2014 Asit Ranjan Mishra

New Delhi: India’s retail inflation accelerated to 8.59% in April compared with 8.31% a month ago on the back of rising food prices.

Food inflation quickened to 9.66% in April compared with 9.1% in the preceding month.

Retail inflation in rural India which has been higher than that in urban India continued the trend with CPI (Rural) at 9.25% and CPI (Urban) at 7.69%.

RBI governor Raghuram Rajan has kept the policy rate unchanged at 8% in the first bimonthly credit policy announced on 1 April, suggesting rates may not be raised further in the near term if the economy continued along the disinflationary “glide path”.

Since September 2013, RBI had increased the repo rate—at which it lends overnight to commercial banks—thrice by a total of 75 basis points (bps), refusing to lower its guard against inflationary threats, which have been a major concern for the central bank the past few years.

One basis point is one-hundredth of a percentage point.

Economists expect Rajan to hold rates only if retail inflation sticks to a road map recently suggested by an expert panel headed by RBI deputy governor Urjit Patel—8% by January 2015 and 6% by January 2016—enduring a host of potential risks.

These include the performance of the monsoon, the impact of El Niño and uncertainty over the setting of minimum support prices for agricultural commodities and administered prices of fuel, fertilizer and electricity.

India may receive below-normal rains this monsoon between June and September as the El Niño evolves with the warming of the central and east Pacific Ocean, private forecaster Skymet Weather Services Pvt. Ltd said last month.

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