India's May WPI falls to 2.17% from 3.85%

The headline inflation dipped to a decade low of 2.18 per cent for May/ Image only for representational purpose

New Delhi: India's annual rate of inflation based on wholesale prices decelerated last month to 2.17 per cent from 3.85 per cent reported for April, as prices of food articles eased, official data showed on Wednesday. According to data furnished by the Ministry of Commerce and Industry, the wholesale price index (WPI) with the revised base year of 2011-12 in May, 2016 had declined to (-) 0.90 per cent. The headline inflation dipped to a decade low of 2.18 per cent for May, making analysts grow more confident of a rate cut by Reserve Bank at the August review. SBI's economic research department said the RBI cannot "avert a rate cut" at the August policy review. "The expectation of a prominent rate cut would become more pronounced if inflation continues to remain benign for a longer time," it said in a note. Domestic brokerage Kotak securities said the retail inflation will come below the 2 per cent mark for June itself and will be at 4 per cent level -- the RBI's medium term target - in March 2018. Even though they chose to stick to their calls of a pause, economists at foreign brokerages HSBC and Nomura said chances of a rate cut are higher given the data print. "Lower inflation and unexciting growth print raises the risk of a rate cut in the RBI's August monetary policy review," HSBC said in a note. It said the downward trajectory in price rise was due to a slump in food and fuel and added that the last time inflation had fallen so low was in May 2001.