Expert views on May inflation data

India's wholesale price inflation accelerated to 7.55% in May from a year earlier, driven by double-digit rises in food and fuel prices, government data showed on Thursday.

Analysts on average had expected an annual rise of 7.60%, a Reuters poll showed. Wholesale prices rose 7.23% in April.

The annual reading for March was upwardly revised to 7.69% from 6.89%, the government said.

COMMENTARY

A PRASANNA, ICICI SECURITIES PRIMARY DEALERSHIP, MUMBAI

"Since core inflation is still below 5%, I would expect RBI to cut rates by 25 basis points as that is the key number. There are cost pressures on inflation from rupee depreciation, excise duty increases, but I don't think that will spill over to the demand side because the demand side pressure are quite weak evident from the manufacturing inflation."

BACKGROUND

- Standard & Poor's this week said that India could become the first of the so-called BRIC economies to lose its investment-grade status, less than two months after cutting its rating outlook for the country.

- The Reserve Bank of India is widely expected to lower its main lending rate by 25 basis points (bps) to 7.75% on June 18 when it reviews its policy for the first time after cutting rates by a sharper-than-expected 50 bps in April.

- Falling global oil prices as well as declining core inflation and growth in India give the central bank room to adjust interest rates, a deputy governor said last week.

- Industrial output rose just 0.1% in April, lower than expectations in a Reuters poll for a 1.7% increase. Output fell in March from a year earlier by 3.5%.

- The economy expanded 5.3% in the March quarter, its slowest pace in nine years, on a combination of mounting global uncertainties, muddled policies, high inflation and steep interest rates at home.

- Manufacturing sector kept up its steady expansion in May, driven by rising output, a business survey showed.

- Car sales rose just 2.8% in May from a year earlier as a hike in excise duty on the vehicles hit demand.

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