Tue Apr 12 07:00:00 CDT 2016

Consensus Actual Previous
Change Y/Y 5.00% 4.83% 5.18%

Consumer prices were weaker than expected in March. At 4.83 percent, the annual inflation rate was down 0.35 percentage points versus its February mark, its second consecutive deceleration and its first sub-5 percent reading since September last year.

The decrease in the headline rate was attributable to falls in both the rural and urban areas. The rate in the former dropped from 6.05 percent to 5.70 percent and in the latter from 4.30 percent to 3.95 percent. Food prices were relatively firm with the 12-month change here dipping less than 0.1 percentage points to 5.21 percent. Elsewhere, inflation stood at 5.50 percent in clothing and footwear and 5.31 percent in housing. Fuel and light weighed in at 3.38 percent and miscellaneous at 4.01 percent.

Having only just cut interest rates last week today's inflation update is unlikely to have much impact upon the RBI. Even so, the steeper than expected decline will at least support hopes of additional easing at some point later in the year.

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.