Let the rains come: India's consumer prices fall more than expected

4/13/2016 12:06:35 AM

(MENAFN- Asia Times) Indian shoppers in retail store

Meanwhile industrial output expanded 2% in February a huge reversal from the 1.5% contraction January. The Bloomberg survey expected an 0.8% gain while economists surveyed by Reuters had forecast 1% growth.

Consumer food prices rose 5.21% in March down from February’s 5.3% increase. The decline was led by a 1.1% drop in fruit prices.

Health-care costs advanced 5.3% while education and personal care both increased 5.7%.

Meanwhile the country’s weather office predicted above normal rainfall which could lead to more monetary easing. The July-September monsoon rains are crucial to keep prices in check as it accounts for about 80% of India's total rainfall and waters more than 50% of farmland.

Reserve Bank of India Governor Raghuram Rajan who cut interest rates last week wants to limit consumer inflation to 5% by March 2017 reported Bloomberg. He said good rains could lead to further monetary easing.

“It's a very pleasant surprise” Saugata Bhattacharya an economist at Axis Bank in Mumbai told Bloomberg. “The central bank would have space for another 25 basis point reduction” in the policy rate.

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