Expert views: March inflation slows to 5.96 percent, below forecast

MUMBAI (Reuters) - India's wholesale price index (WPI) rose a slower-than-expected 5.96 percent in March, the lowest rate in more than three years, government data showed on Monday.

Analysts polled by Reuters had expected wholesale prices, the main inflation measure, to rise an annual 6.4 percent, slower than an annual rise of 6.84 percent in February.

The reading for January was revised up sharply to 7.31 percent from 6.62 percent.

Core inflation eased to around 3.5 percent from 3.8 percent in February, analysts said.

COMMENTARY

ANJALI VERMA, ECONOMIST, PHILLIPCAPITAL, MUMBAI

"It is a fairly good number, in line with my expectation of 6 percent. The spike in the January number is due to the revision in the LPG and bulk diesel prices. I am expecting inflation to fall further below 6 percent and continue the downtrend till October. This reinforces my call for a 25 basis points rate cut in the May policy."

SHUBHADA RAO, CHIEF ECONOMIST, YES BANK, MUMBAI

"The decline in core inflation represents compression in demand which is comprehensive. And this was corroborated with the PMI data as well. The recent sets of data indicates that a 25 basis points rate cut is on the cards along with measures to support liquidity, which could be combination of cash reserve ratio cut and open market operations. However, we expect CRR cut of 50 basis points for the entire 2013/14 year.

However, there has been a sharp revision in the inflation data for January, and we need to monitor reasons for that adjustment, and then we can take a further call."

BACKGROUND

- India's industrial output barely grew in February and retail inflation edged towards single-digits in March with the first fall in six months, adding to expectations the central bank will make a cautious interest rate cut next month.

- Headline inflation is expected to average around 6.5 percent this year, above the Reserve Bank of India's perceived comfort level of around 5 percent, reducing the chances of aggressive policy action to pull the economy out of its slowest pace of expansion in a decade. Economic growth is seen subdued at 6 percent in 2013/14 and any recovery will be gradual, a Reuters poll of economists showed.

- Finance Minister P. Chidambaram will seek to drum up foreign investment from the United States and Canada this week to fund a record high current account deficit, even as policymakers debate the risks of over-reliance on foreign investors to finance the gap.

- Annual car sales fell for the first time in a decade in the financial year just ended and are expected to post subdued growth this year, calling into question bullish expectations that fuelled billion-dollar bets from global manufacturers.

(Reporting by Treasury, Markets teams; Editing by Ranjit Gangadharan)