1 min read.Updated: 13 Jul 2017, 09:38 AM ISTLivemint
RBI needs to look beyond the noise in the inflation data, and wait and watch for some more time before taking a decision to cut rates
The odds of a rate cut from the Reserve Bank of India (RBI) will increase with the Consumer Price Index (CPI)-based inflation for the month of June coming in at 1.54%, well below the 2-3.5% range it had predicted for the first half of the year. Nevertheless, as Gaurav Kapur, chief economist at IndusInd Bank Ltd, points out, much of the fall in inflation is on account of cheaper vegetable and pulses prices and due to the base effect. As RBI had pointed out in its last monetary policy statement, “The prices of pulses are clearly reeling under the impact of a supply glut caused by record output and imports." Vegetable prices have already moved up in July. In fact, the food price index has moved up from 132.4 in May to 134.1 in June.