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May Headline Inflation Eases To 4.70 Per Cent

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The headline inflation slowed for a fourth straight month in May to 4.7 per cent from a year earlier, but a slump in the rupee is likely to prevent the RBI from lowering policy rates on Monday despite the economy slowing to a decade-low level.
The WPI-based inflation fell, driven mainly by declining prices of manufactured items, even as prices of food articles inched up. Inflation based on the Wholesale Price Index (WPI) stood at 4.89 per cent in April. In May, 2012, it was 7.55 per cent.
As per official data, WPI inflation in the manufactured items category declined to 3.11 per cent in May from 3.41 per cent in April.
The non-food articles category, which include fibre, oil seeds and minerals, saw sharp decline in inflation to 4.88 per cent, from 7.59 per cent in April.
However, inflation in food articles category, which has a 14.34 per cent share in the WPI basket, rose to 8.25 per cent in May. Inflation in this category was at 6.08 per cent in April.
The rise in food inflation was on account of increase in prices of onions, vegetables, cereals and protein-based items. Inflation in vegetables stood at 4.85 per cent in May, against (-)9.05 per cent in the previous month.
The rate of price rise in onion was high at 97.40 per cent for the month, as against inflation rate of 91.69 per cent in April.
Inflation for March was revised downwards to 5.65 per cent from 5.96 per cent as per provisional estimates. The inflation data would be closely watched by the Reserve Bank while formulating its mid-quarter policy which is scheduled on Monday (17 June). There have been demands for a lower interest rate in the backdrop of declining inflation.
Finance Ministry sources, commenting on inflation numbers, said they would want lower interest rates and monetary policy transmission. While the Reserve Bank has lowered interest rates by 1.30 per cent since January 2012, the banks have cut lending rates by only 0.30 per cent.