Inflation In The Month Of May Eases To 8.28%

Two important news announcements were made yesterday after the market hours. One was CPI for the month of May and the other was IIP data for the month of April 2014. After a long time, the data showed some positivity, where the production has increased and the inflation has decreased at the same time. The Industrial Index of Production (IIP) data for the month of April 2014 was at 172.1 as compared to 166.5 during March 2014. This means that on yearly basis the IIP has surged by 3.4%.

The Consumer Price Index (CPI) for the month of May stands at 8.28%, marginally lower from 8.59% in April. Provisional figures suggested that inflation in rural urban areas has seen some signs of easing off. The inflation in the rural areas has reduced by 26 basis points standing to 10.27%, while in case of urban areas the inflation has contracted by 37 basis points standing to 8.35% for the month of May 2014.

Though the inflation in the month of May has shown some sign of improvement the food, beverage and tobacco segment has surged by 0.91% in the month of May as compared to the previous month of this fiscal year. In the food beverage segment vegetables was the commodity which rose by 3.5% in the month of May as compared to the month of April. The commodity which helped the inflation to remain under control was cereal and oil & fats. The fuel & light group during the month of May has remained flat as compared to April 2014.

From the above we can say that the economy has started to show some sign of improvement. On one side the inflation was under control and on the other side the production has increased. But still the inflation is too high i.e. it more than 8%. And as the kharif crops were destroyed due to adverse weather mainly due to Hailstorm, the impact of El Nino is yet to be seen. Therefore, we don’t see any rate cut by RBI in near future.