Annual inflation in India continued to ease in May, with wholesale prices rising at the weakest pace in three-and-a-half-years. However, a rate cut is highly unlikely on Monday as the extreme weakness of the rupee could lift import costs of the nation, which relies heavily on overseas crude oil.
Inflation based on the wholesale price index eased to 4.7 percent, a 43-month low, from 4.89 percent in April, data published by the Ministry of Commerce and Industry showed Friday. The rate was also below the expected reading of 4.87 percent.
Cost of primary articles increased at a faster pace of 6.65 percent after rising 5.75 percent a month ago. Likewise, food prices were up 8.25 percent, up from 6.08 percent in April.
Meanwhile, cost of non-food articles advanced 4.88 percent compared to the 7.59 percent increase in the prior month. The increase in fuel and power prices also slowed to 7.32 percent from 8.84 percent. Manufactured product prices gained 3.11 percent versus the 3.41 percent increase in April.
The ministry revised March WPI inflation to 5.65 percent from 5.96 percent.
The central bank has reduced its key rates thrice this year to revive the flagging economic growth. Reserve Bank of India Governor Duvvuri Subbarao hinted that there is limited scope for a further reduction.
Despite mounting pressure from industry groups, the RBI is expected to hold its repo rate at 7.25 percent and the reverse repo rate at 6.25 percent, at the upcoming meeting on June 17.
Oil and gold imports still continue to weigh on its huge current account deficit. Moreover, the weak currency has raised concerns about future inflation.
The Indian rupee's fall to an all-time low of 58.9855 against the dollar on Tuesday, prompted the central bank to intervene in the currency market to contain the depreciation.
Finance Minister Palaniappan Chidambaram said yesterday that measures are being taken to contain the rupee volatility.
Chidambaram said fiscal consolidation is underway and is being given top priority. He assured more reforms in June, that might include foreign direct investment limits and gas pricing.
Fitch Ratings raised India's credit rating outlook to 'stable' from 'negative' this week, signaling support to the government's structural reforms and efforts to trim the country's massive budget deficit.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.