MUMBAI: India's wholesale inflation dropped for a sixth straight month as fuel prices and manufacturing costs continued to ease, government data showed Thursday.
The Wholesale Price Index (WPI), an inflation indicator which measures the biggest basket of goods, fell a sharper-than-expected 2.65 percent in April from a year earlier.
The fall was bigger than the 2.30 percent slip predicted by a Bloomberg survey and follows a 2.33 percent decline in March.
The WPI data comes two days after figures showed consumer inflation was at its lowest level in four months and factory output was sluggish.
The weak economic indicators strengthen the case for more interest rate cuts from the Reserve Bank of India (RBI), analysts said.
"Fundamentals like the momentum of fall in consumer inflation are suggesting RBI can afford a 25 basis points rate cut by June 2," said Shubhada Rao, chief economist with YES Bank.
Governor Raghuram Rajan has already cut rates twice this year, but he wants banks to pass on the lower borrowing costs to customers before making further reductions.
Rajan has also flagged the risk of a rise in inflation if global oil prices surge.
India remains vulnerable to an "oil shock" since it imports nearly all of its needs and has only recently began building a strategic oil reserve.
Analysts also suggested that the RBI will hold rates until the extent of crop damage due to unseasonal rains on food prices becomes known in a few months.
"The RBI cannot afford to reverse the rate cycle just a few months down the line if the food inflation goes beyond acceptable limits," said Arun Singh, senior economist with Dun & Bradstreet.
"It will wait for stability and look to maintain confidence in macro-economic policy."
The RBI has a target of bringing inflation consistently below six percent by January 2016, and to four percent for the 2016-17 financial year.
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