India inflation cools slightly

India’s year-on-year inflation cooled slightly in April, official data showed Friday, easing pressure on the central bank for a swift hike in interest rates.

Wholesale price inflation, the country’s main cost-of-living measure, slipped to 9.59 percent last month from 9.9 percent in March — broadly in line with market expectations, the commerce ministry said.

The Reserve Bank of India hiked its key interest policy rates by 50 basis points in March and April and has begun unwinding monetary stimulus measures used to shield the country from the global financial downturn.

Earlier this week, the bank said it would take a “calibrated” approach to further rate increases amid uncertainty about the fallout on India from the eurozone debt crisis.

“With the external situation highly uncertain and India’s financial system highly vulnerable to sudden capital outflows, now is not the time to aggressively withdraw liquidity and hike borrowing costs,” Nikhilesh Bhattacharyya, economist at Moody’s Analytics, said in a research note.

Slower-than-expected industrial output growth of 13.5 percent in March as the government withdrew stimulus measures also has reduced pressure on the central bank to raise rates swiftly, economists say.

The central bank is expected to wait for the onset of the monsoon rains that sweep the country from June to September to see whether they bring down food prices before taking any further tightening action.

Last year’s rains, the weakest in nearly four decades which hit agriculture output, sent the cost of food soaring and caused huge hardship for India’s poor masses.

The food price inflation index clocked up a still-strong 16.87 percent year-on-year rise but analysts expect food prices to ease amid hopes of a good harvest.

However, some economists said there could be a move by the central bank to tighten monetary policy before its July 27 policy meeting.

“We expect the Reserve Bank to maintain its tightening stance and we don’t rule out an inter-policy meeting (tightening) action,” Shubhada Rao, chief economist at India’s Yes Bank, told AFP.

The central bank could increase policy rates by a further 150 basis points this financial year to March 31, 2011 if inflation pressures do not ease, economists have forecast.