In this photograph taken on May 6, 2013, an Indian factory employee wheels a trolley loaded with air conditioners for dispatch at the Hitachi Home and Life Solutions
In this photograph taken on May 6, 2013, an Indian factory employee wheels a trolley loaded with air conditioners for dispatch at the Hitachi Home and Life Solutions' air conditioner manufacturing facility near Kadi, some 50 kms from Ahmedabad. India's inflation on May 14, 2013, unexpectedly plunged to below five percent in April -- its lowest rate in 41 months -- fanning hopes of further interest rate cuts to spur a sharply slowing economy. AFP File Photo

NEW DELHI: Inflation in India eased to its lowest level since 2009 in April, according to data showed on Tuesday, fanning hopes that the central bank would cut interest rates further to help spur a sharply slowing economy.

The Wholesale Price Index, India's most closely watched cost-of-living benchmark, rose 4.89 per cent in April from a year earlier, sharply lower than the previous month's rise of 5.96 per cent.

The drop of more than one percentage point between the March and April level beat consensus market expectations that inflation would decline to around 5.5 per cent.

It follows data on Monday that showed consumer price inflation slipped below the psychologically important 10 per cent level to 9.39 per cent in April.

The figures come as a boost to the Congress-led government which is keen to tame inflation before general elections due in the first half of 2014, as it looks to boost a slowed economy and shake off a spate of corruption scandals.

The fall in inflation to its lowest level since November 2009 raised hopes that upward price pressures may ease in Asia's third-largest economy.

But the central bank has warned that India's massive current account shortfall – the broadest measure of trade – must also improve for it to significantly reduce borrowing costs.

Even with the fall in inflation, “the central bank is probably going to need to see several months of better trade data before opting to cut rates again,” Credit Suisse economist Robert Prior-Wandesforde said ahead of Tuesday's data.

The central bank has already made three 25 basis point cuts to lending rates since the start of 2013 to jumpstart an economy growing at five per cent, its lowest level in a decade.

Published May 14, 2013 03:38pm

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maju
May 14, 2013 05:46pm
Indian economy is on track. further interest rate cut will increase growth rate on track