Annual CPI inflation stood at 4.87 percent in April, essentially matching market expectations and nearly 0.4 percentage points short of its slightly stronger revised March reading. This was the second decline in a row and the first sub-5 percent print this year.
Inflation in urban areas dropped from 4.75 percent to 4.36 percent while in rural regions it was down from 5.67 percent at 5.37 percent. Overall food inflation, a key factor influencing RBI policy, was 5.11 percent after a 6.14 percent print last time. Elsewhere, food and beverage prices were up 5.36 percent versus April 2014, clothing and footwear 6.15 percent higher and housing 4.65 percent more costly. Fuel and light inflation was 5.60 percent.
Combined with the sharper than anticipated deceleration in March industrial production (see today's calendar entry) the drop in inflation last month should be seen positively for RBI easing hopes and will boost speculation about a rate cut as soon as June.
Consumer Price Indexes (CPI) measure changes over time in general level of prices of goods and services that households acquire for the purpose of consumption. The data are released for previous month and are not seasonally adjusted.
CPI numbers are widely used as a macroeconomic indicator of inflation, as a tool by governments and central banks for inflation targeting and for monitoring price stability, and as deflators in the national accounts. CPI is also used for indexing dearness allowance to employees for increase in prices. CPI is therefore considered as one of the most important economic indicators.
CPI numbers presently compiled and released at national level for India reflect the fluctuations in retail prices pertaining to specific segments of population in the country -- industrial workers, agricultural labourers and rural labourers. These indexes do not encompass all the segments of the population in the country and as such do not reflect true picture of the price behavior in the country. To overcome the above, the Central Statistics Office (CSO) of the Ministry of Statistics and Programme Implementation has started compiling new series of CPI for the entire urban population or CPI (Urban) and CPI for the entire rural population or CPI (Rural), which reflect the changes in the price levels of various goods and services consumed by the urban and rural population.
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