The consumer price inflation (CPI) in India has come down to 4.28 percent in March slowing for the third consecutive month, according to data released by the Central Statistics Office. CPI touched the low of 4.44 percent in February 2018 against 5.07 per cent in January 2018, after touching the high of 5.2 percent in December last year.
Earlier, the Monetary Policy Committee (MPC) of the Reserve Bank of India predicted that the CPI will be in the range of 5.1%-5.6% for the first half of 2018-19.
Having lowered inflation expectations, RBI did not increase policy rates in the last monetary policy committee meeting. The RBI raised its GDP growth projections to 7.4% from 6.6%.
The inflation rate, however, could increase in future on the back of rising crude oil and commodity prices along with increased minumum support price for farmers .
Low inflation number will have a positive impact on the bond market, as interest rates have an inverse relationship with bond prices. Bond yields declined to 7.13 per cent on the day monetary policy was announced as the RBI kept a dovish stance. Bond yields started rising last month, when the government announced to borrow 48 per cent of the total borrowings in the first half of financial year 2018-19. Following the news, bond yield declined by 29 basis points on the single day to 7.33 per cent.
Separately, industrial output maintained its growth of over 7 per cent for the second consecutive month in February.