Continuing the deflationary trend for fifth month in a row, wholesale inflation touched a record low of (-)2.33 per cent in March on cheaper manufactured goods and food items, prompting industry to renew its demand for further rate cut by the Reserve Bank.
Inflation in manufactured items slipped in to the negative territory, reflecting poor offtake of goods.
Wholesale Price Index (WPI) based inflation has been in the negative zone since November 2014 mainly on account of cheaper food and fuel products.
It was at (-)2.06 per cent in February, (-)0.39 per cent in January, (-)0.50 per cent in December and (-)0.17 per cent in November. It was 6 per cent in March 2014.
Dr Jyotsna Suri, President, FICCI
Both WPI and CPI data for the month of March 2015 report inflation remaining at ease. The latest numbers indicate moderation in food prices even though possibility of upside risks from unseasonal rains remains imminent. However, this most likely will be counterbalanced with subdued demand conditions and soft commodity prices. As for tackling food inflation, an improved supply side response would be more appropriate. Further, the IIP numbers released last week reported a significant improvement in February 2015, which is encouraging. Going ahead, it will be imperative to support this buoyancy to assure a sustainable turn around in the industrial sector. We look forward to another round of downward revision in the repo rate in June 2015 or perhaps earlier.
Deflation in the manufactured products category was at (-)0.19 per cent, the lowest in over five years. Last time the rate of price rise in manufactured items had contracted in July 2009 at (-)0.2 per cent.
Inflation in food articles category stood at 6.31 per cent, and for fuel and power, it was (-)12.56 per cent.
With the decline in both wholesale and retail inflation, industry chambers have renewed their demand for further rate cut by the RBI to give a boost to manufacturing sector.
“Going ahead, it will be imperative to support this buoyancy in factory output to assure a sustainable turn around in the industrial sector. We look forward to another round of downward revision in the repo rate in June 2015 or perhaps earlier,” Ficci President Jyotsna Suri said.
Retail inflation, based on Consumer Price Index released last week fell, to a 3-month low of 5.17 per cent in March on the back of easing food prices.
Industrial output growth jumped to nine-month high of 5 per cent in February on better performance of manufacturing sector and higher offtake of consumer and capital goods.
The Reserve Bank, which has reduced repo rate by 0.5 per cent since January, refrained last week from further cut in its first bi-monthly monetary policy review in the current fiscal. The next review is due on June 2. MORE PTI JD CS SA 04151615
The January WPI inflation data has been revised downwards to (-)0.95 per cent as against the provisional estimate of (-)0.39 per cent.
Experts said the central bank is likely to place greater emphasis on retail inflation numbers, than the path charted by the one based on WPI.
“The sub-zero print for core-WPI inflation in March would have a limited impact on the timing and magnitude of rate cuts by the RBI. We continue to expect repo rate cuts to be limited to 0.50 per cent in the remainder of this calendar year,” ICRA Senior Economist Aditi Nayar said.
As per government data released today, inflation in onions, milk and protein-rich items like egg, meat and fish inched upwards, vegetables and fruits saw the rate of price rise decline during the month.
The rate of price rise in potato saw the steepest fall at (-)20.66 per cent in March, while for wheat it was (-)1.19 per cent.
Inflation in vegetables was 9.68 per cent in March, as against 15.54 per cent in February.
Inflation at record low, rate cut chorus gets louder
With deflation persisting for the fifth straight month on account of cheaper food and fuel products as well as manufactured items., corporates today said the trend is a clear pointer to the RBI to slash key rates further to revive consumer confidence and boost investment, crucial to kickstart growth.
“It is a clear pointer for the Reserve Bank and the Finance Ministry to shift focus completely towards growth.
Easing of interest rates and a host of other variables are needed to ensure India achieves the kind of growth as projected by the World Bank and IMF,” Assocham President Rana Kapoor said.
“The key challenge is revival in consumer confidence and restoration of investment appetite. The credit offtake remains subdued against the backdrop of high interest rates, slower pace of product demand and global benign economic environment.”
Inflation measured as the wholesale price index (WPI) stood at (-) 2.06 per cent in February, (-) 0.39 per cent in January, (-) 0.50 per cent in December and (-) 0.17 per cent in November. It came in at 6 per cent in March 2014.
Deflation was also visible in the manufactured products category where the rate of price rise dropped to a record low of (-) 0.19 per cent.
Inflation in food article category stood at 6.31 per cent, and for fuel and power, it was (-) 12.56 per cent.
“Continuous deceleration in WPI inflation is welcome and we expect disinflationary momentum to continue and macro-economic situation is strengthened further in coming times,” PHD Chamber President Alok B Shriram said.
The decline in inflation and a positive industrial output data would give room to the Reserve Bank to consider a cut in interest rates.
