Inflation at 3-yr low; RBI may cut rates

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New Delhi: Inflation fell to a three-year low in March at 5.96 per cent raising hopes of an interest rate cut by the Reserve Bank of India.
According to analysts, core inflation, which is mainly tracked by RBI to determine its rates, fell to around 3.5 per cent in March, which is the slowest in more than three years.
Despite calls from the government, RBI has been hesitant to cut interest rates aggressively as inflation was high. Now with inflation coming down, experts feel that the apex bank will be under pressure to cut interest rates  to boost growth.
Also inflation has come below RBI’s projection of 6.8 per cent. “The fact that this is the first time (in over three years) it is below six per cent, is very important and I hope that we will continue to see that often,” said Planning Com-mission’s deputy chairman Montek Singh Ahluwalia.
He noted that inflation behaviour is consistent with what government has been saying that it is slowly coming under control. “I have to say that monthly numbers can jump around but it has been our view that in a gradual way inflationary pressure is coming down,” added Dr Ahluwalia.
GDP growth had hit a near four-year low of 4.5 per cent in the quarter to end-December. “We believe there is scope for a 25 basis points rate cut in the RBI’s annual policy on May 3,” said Bhupali Gursale, economist, Angel Broking.

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