India's consumer inflation slowed to a new low in June as food prices fell for the second month in a row, government data showed Wednesday. RBI has fixed an inflation medium term target of 4 per cent with a band of +/- 2 per cent.
The pace of expansion, however, was slower than a revised 2.8% annual rise in April and compared with a 1.9% growth forecast by economists in a Reuters poll.
Economists in a Reuters poll had predicted inflation to ease to 1.7% last month. "The number of 1.54 per cent is historically low andreflects the firm and ongoing consolidation of macro economicstability", Chief Economic Adviser Arvind Subramanian toldreporters.
Reports said that drop in food and oil prices dragged down the consumer inflation in June.
Retail inflation at record low, falls to 1.54 per cent in June
Despite a mid-year switchover to GST had prompted shops to de-stock and clear up the inventory pile through discounts and rebates ahead of July 1 when the new system kicked in, clothing and footwear inflation marginally fell to 4.17 percent in June from with 4.41 percent in May. The next meeting of RBI's monetary policy committee is scheduled next month.
The RBI will also be monitoring the progress of GST and the monsoon this year, said Udhakar Pattabiraman, Head of Research Operations, William O'Neil India.
"This print will provide room for RBI to cut repo rate by 25 bps, but scope for further rate cuts would be restricted as the RBI would likely wait-and-watch the impact of HRA (house rent allowance) increases over the next few months", says Suvodeep Rakshit, senior economist at Kotak Institutional Equities.
The Index of Industrial Production rose by 2.79 per cent in April and 8 per cent in May previous year.
The data further revealed that output of the capital goods segment, considered as key indicator of investment, shrunk by 3.9 per cent compared to a high growth of 13.9 per cent recorded in May 2016.
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