MUMBAI: India's consumer inflation fell slightly in March, the government said Monday, raising the prospect of a further cut in interest rates.
Retail inflation declined to a lower than expected 5.17 percent in March from 5.37 percent in February, when unseasonal rains pushed up food prices.
A dip in global crude oil prices and steady food costs have helped control inflation to around five percent from double digits in 2013, allowing the central bank to cut interest rates twice so far this year to spur growth.
But Reserve Bank of India governor Raghuram Rajan kept rates on hold at a scheduled review last week as he waited for commercial lenders to pass on the two previous cuts to customers.
"It is a good sign that consumer inflation is still in the moderation zone. But the worry about food inflation remains," said Arun Singh, senior economist with Dun & Bradstreet.
"We need to see the complete pass-through of the impact of untimely rains on food prices because food prices have a tendency to spill over and spark inflation worries."
Rising food prices are a critical issue in India where even minor increases cause hardship for tens of millions of poor.
The RBI has a target of bringing inflation consistently below six percent by January, and to four percent for the 2016/17 financial year.
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