India's inflation rate falls again

http://www.bbc.co.uk/news/business-34246049

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India's inflation rate fell slightly to 3.66% in August, official figures have shown.

July's rate for consumer prices was revised down to 3.69%, from a first estimate of 3.78%.

The drop is partly due to a stabilisation in food prices following better weather.

Lower inflation has led to calls for India's central bank, the Reserve Bank of India (RBI), to cut interest rates, which currently stand at 7.25%.

Such high rates are designed to curb inflation that has stood at about 5% for most of 2015.

With inflation now substantially lower, some businesses are calling for rates to be cut.

Many analysts believe the RBI will listen to such calls.

"We expect a rate cut, if not immediately, by the month-end policy meeting," said Sujan Hajra at Anand Rathi Securities.

Analysis: Sameer Hashmi, BBC business reporter, Mumbai

The latest inflation figure will again put the spotlight on India's central bank as the clamour for a rate cut is going to get louder. Both the government and industry want lower lending rates to spur India's economic growth, especially at a time when China is slowing down. And August's inflation data provides them with fresh ammunition to step up the pressure.

But with Asia's third largest economy facing a rain deficit - which many are predicting could be one of the worst in recent decades - food prices may go up in the later part of the year, again leading to higher inflation.

And this poses a huge dilemma for Raghuram Rajan, governor of the Reserve Bank of India - whether to cut rates now or wait a little longer.