May inflation eases to 8.28 per cent from three-month high of 8.59 pc in April

Mumbai:Consumer Price Inflation (CPI) eased to 8.28 percent in May from a three-month high of 8.59 percent in April aided by lower food prices.

Meanwhile, the industrial production (IIP) data for April 2014 stood at 3.4 percent versus a CNBC-TV18 poll of 1.6 percent, revealing a pick-up in manufacturing, electricity and capital goods sectors.

For the past two year CPI had been rather sticky at around 10 percent making it difficult for Reserve Bank of India (RBI) cut interest rates even though economic growth fell below 5 percent.

Thursday's numbers will bring fresh cheer to the market which has been rallying in hope of an economic turnaround. Prime Minister Narendra Modi has promised to break the spell of weak growth and high inflation.

However, if fears of El Nino come true, India may staring at drought followed by higher inflation followed by tough monetary policy decisions. Standard Chartered Global Research has forecasted FY15 CPI inflation at 8.0%, significantly lower than 9.4% in FY14. The research further predicts GDP growth at 5.3 percent in FY15 (year ending 31 March 2015) and 5.8 percent in FY16.

On Wednesday, trade ministry released data for May 2014 which showed trade deficit increasing to USD 11.2 billion, highest since July 2013.