India's annual rate of inflation based on wholesale prices decelerated further in May 2017 to 2.17 per cent from 3.85 per cent in April as food prices eased, official data showed on Wednesday.
Wholesale prices decelerated in April to 3.85 per cent from 5.29 per cent reported for March, as prices of food, fuel and manufactured products fell.
According to data from the Ministry of Commerce and Industry, the wholesale price index (WPI), with the revised base year of 2011-12, in May 2016 declined to 0.90 per cent.
On a year-on-year (YoY) basis, expenses on primary articles, which constitute 22.62 per cent of the WPI's total weightage, declined by 1.79 per cent as compared to a rise of 4.38 per cent during the same month a year ago.
However, prices of food articles dipped 2.27 per cent during the month under review.
Prices of manufactured products, which comprise nearly 64.23 per cent of the index, rose by 2.55 per cent.
The base year of the current WPI, which was revised last month from 2004-05 to 2011-12, does not include indirect taxes thus decreasing volatility in inflation at wholesale level, the government has said.
According to officials, the practice of not including the indirect taxes in WPI data is in consonance with international practices and is done to capture changes in the economy more effectively.
The updated item basket of WPI has 697 items in the new series from the earlier 676.
Official data on Monday showed that retail, or consumer price indexed (CPI), inflation in India during May fell to 2.18 per cent, as compared with 5.76 per cent in the same month of last year, pulled down by sharp fall in food prices.
The consumer food price index (CFPI) moved into deflation as prices in May fell by (-)1.05 per cent, as compared with a rise of 7.45 per cent in the corresponding month of 2016, pulled down by lower prices of pulses, cereals and perishable goods.
The current inflation rate is the lowest rate since the series began in 2012.
Meanwhile, at its second bi-monthly monetary policy review of the fiscal last week, the Reserve Bank of India (RBI) held its key interest rate at 6.25 per cent for the fourth policy review in succession citing, among other things, the upside risks to inflation.
"At the current juncture, global political and financial risks materialising into imported inflation and the disbursement of allowances under the 7th central pay commission's award are upside risks," the RBI's Monetary Policy Statement said in Mumbai.
Announcing status quo on the key interest rate, RBI Governor Urjit Patel said the abrupt fall in inflation in April "from the firming trajectory that was developing in February and March has raised several issues that have to be factored into the inflation projections".
"Risks are evenly balanced, although the spatial and temporal distribution of the monsoon and the government staying the course in effective food management will play a critical role in the evolution of risks," Patel said.
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