New Delhi: India's annual consumer price inflation unexpectedly slowed down to a three-month low of 5.17 percent in March as food prices moderated, government data showed on Monday.
The Reserve Bank of India has cut interest rates twice this year at unscheduled meetings, but kept its key repo rate on hold at 7.50 percent last week, waiting to assess inflationary pressures and give commercial banks more time to cut their lending rates.
While inflation has steadily accelerated from a record low of 4.38 percent struck in November it remains below the 6.0 percent upper end of the central bank's target range.
Many economists expect the RBI to keep rates unchanged for now, but cut once more by the end of June. The next policy review in on June 2.
"(Consumer) inflation is expected to average 5.5 percent in 2015, limiting future repo rate cuts to 50 basis points over the remainder of 2015," said Aditi Nayar, an economist at ICRA, the Indian arm of Rating Agency Moody's.
During the last few weeks, unseasonably heavy rain in north and central India have damaged crops, leading to a rise in vegetable and foodgrain prices.
India has ordered imports of up to 80,000 tonnes of wheat, the most in five years, because it fears a dip in foodgrain production, sources told Reuters.
The RBI said last week that it expects consumer inflation to stay at current levels in the April-June quarter helped by weak oil and food prices, but rise to 5.8 percent by the end of the year.
The central bank has targeted bringing inflation down to 4 percent by the end of 2017/18.
Globally, central banks are fighting to contain concerns over deflation, as prices continue to fall in most eurozone countries, Japan and China.
India, however, is one of the brighter spots, with the economy picking up after two years of sub-par growth, reflecting in part a recovery in business confidence since Prime Minister Narendra Modi swept to power with a landslide election victory last May.
According to data released on Friday, India's industrial accelerated to show 5.0 percent growth in February, the fastest in three months and well above a Reuters poll forecast.
On Thursday, Moody's revised India's sovereign rating outlook to "positive" from "stable", saying an upgrade of the credit rating was possible in the next 12-18 months, if things continue to improve.
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