May deflation at 2.36%; in negative zone for 7th month
In the coming <g data-gr-id="40">months however</g> the price situation will depend on the progress of monsoon, experts said. The Wholesale Price Index (WPI) based inflation was (-)2.65 <g data-gr-id="38">per cent</g> in April. It has been in the negative zone since November 2014. Inflation in last May was 6.18 <g data-gr-id="39">per cent</g>.
The lower inflation comes amid a forecast of deficient monsoon this year. In contrast to IMD’s forecast of 12 per cent deficient rainfall, the onset of monsoon has been reasonably strong so far.
Citigroup said that overall the monsoon is still a risk factor but “we expect CPI (retail inflation) to undershoot RBI’s Jan-16 projection by 40bps and average 5 <g data-gr-id="50">per cent</g> in 2015-16. This is likely to create room for further 25 bps cut in current fiscal”. The CPI inflation had inched up marginally in May to over 5 per cent from 4.87 per cent in the previous month.
As per the WPI data released by <g data-gr-id="45">government</g> on Monday, vegetable inflation was (-)5.5 <g data-gr-id="46">per cent</g>, with potato prices falling by about 52 <g data-gr-id="47">per cent</g>. Protein rich items like egg, meat and fish too were cheaper in May as compared to the previous month and so were milk, fruits, rice and cereals. Overall food inflation was 3.8 <g data-gr-id="48">per cent</g>, much lower than the previous few months.
Similarly, the May inflation in manufactured items (food products, sugar, edible oils, beverages) declined by 0.64 per cent, lowest in past many months.
Inflation in fuel and power basket was at (-)10.51 per cent on <g data-gr-id="43">annual</g> basis, though slightly up from April.
Commenting on the data, ICRA economist Aditi Nayar said the cooling of food inflation in the WPI and Consumer Price Index over the recent months is reassuring in light of continuing uncertainties regarding the monsoon dynamics.
She said however that further rise in year-on-year inflation for pulses in May in the WPI as well as the CPI, is a cause for concern, given the uncertainty regarding the extent and timing of monsoon rainfall in key pulses growing areas, which have an unfavourable irrigation coverage.
Rupee up against yen, euro; down vs US dollar: DBS
Backed by projected strong growth and inflow of investments, the Indian rupee has appreciated by 13.7 <g data-gr-id="100">per cent</g> against the Japanese yen and 12.8 <g data-gr-id="101">per cent</g> against the euro over the past 11 months, Singapore’s DBS banking group said on Monday. It has however declined 6.1 <g data-gr-id="102">per cent</g> in value against the US dollar from July 2014 to June this year, as the greenback has appreciated against Asia’s 10 currencies on its own economic strength. Giving performances of Asian currencies, David Carbon, managing director for economic and currency research at DBS, said the rupee has appreciated by 6.6 <g data-gr-id="103">per cent</g> from July 2014 to this month against the Japanese yen, euro and $combined.
The combined 10 Asian currencies have also appreciated by 6.6 <g data-gr-id="104">per cent</g> against the yen, euro and $put together over the same period. Currencies from China, Hong Kong, South Korea, Taiwan, Indonesia, Singapore, Malaysia, Philippines, Thailand and India had, combined together, appreciated by 13.7 <g data-gr-id="105">per cent</g> against the yen and 12.8 <g data-gr-id="106">per cent</g> against euro. However, they lost in value by 6.1 <g data-gr-id="107">per cent</g> against the American currency. Individually, the gain/loss figures are the same for the Indian currency vis-a-vis others. “Asian currencies are too strong,” Carbon told reporters during media briefing today, citing their performances against the yen, euro and USD. He said the Asian currencies should soften or else there would be pressure on the region’s economies. Asia’s combined economic growth is forecast at 6.25% this year. Comparatively, US growth is forecast at 2.2 <g data-gr-id="108">per cent</g>, Japan 1.2 <g data-gr-id="109">per cent</g> and Europe 0.9 <g data-gr-id="110">per cent</g> during for the year.