India inflation drops 6% in unexpected dip

New figures for March show Wholesale Price Index dropping to 5.96% New Delhi – Arabstoday India's inflation unexpectedly slipped to below six percent for the first time in nearly three and half years, official data showed on Monday, fanning hopes of fresh interest rate cuts. The closely watched Wholesale Price Index fell to 5.96 percent in March from a year earlier, down from 6.84 percent the previous month, marking the lowest level since November 2009.
The March figure far undershot market expectations that inflation would decline to around 6.4 percent.
The better-than-expected inflation data along with other economic indicators showing weak growth in Asia's third-largest economy are expected to give the central bank leeway to cut interest rates for a third time this year.
The inflation numbers were good news for the Congress-led government, which has been battered by a spate of corruption scandals and is keen to revive economic growth and tame inflation before facing voters in elections due in 2014.
The bank, which holds its next monetary policymaking review on May 3, has already cut lending rates twice since the start of 2013 as it seeks to jumpstart an economy which has been growing at five percent, its lowest level in a decade.
The bank's benchmark lending rate to commercial banks stands at a relatively elevated 7.5 percent and the cheapest consumer loans are running at around 10 percent, dampening consumer demand.
The Reserve Bank of India has insisted that further rate cuts hinge on inflation slowing to around four to six percent.