Softer inflation gives RBI room to cut rate: Industry

he fall in retail inflation in March to a 3-month low of 5.17% provides leeway to the Reserve Bank (RBI) to resume its rate-cutting cycle, India Inc said on Tuesday. 

"This should persuade the RBI to resume its rate-easing cycle to support growth without being too concerned about the impact on inflation," CII Director General Chandrajit Banerjee said. "Notwithstanding, the bad weather conditions in March, the fall in CPI inflation, that too led by deceleration in the prices of fruits and vegetables, is inspiring and indicative of improved supply side conditions in the country," PHD Chamber of Commerce President Alok Shriram said.

"Stability in retail inflation would help strengthening of macroeconomic system and pave the way for soft monetary policy environment, going forward," Shriram added. The RBI has lowered interest rates by a total of 0.50% since January 2015 outside the policy cycle this year.

However, in its latest policy review on April 7, RBI Governor Raghuram Rajan kept repo rate unchanged, awaiting clarity on impact of unseasonal rains on food inflation even as he wanted banks to pass on benefits of the previous two rate cuts.

Easing of food prices, mainly milk and vegetables, pulled down the March retail inflation. The retail inflation as measured by Consumer Price Index was 5.37% in February, and 5.19% in January. It was 8.25% in March last year.