Fall in wholesale inflation gives rate cut hope

By meeting the conditions of budgeted WPI and Consumer Price Index, the Reserve Bank has given scope for further rate cut to substitute weakening global demand and pick up domestic investment cycle, says ASSOCHAM

The Dollar Business Bureau 

  The Wholesale Price Index (WPI) for all commodities for the month of November rose by 0.5%, the government said on Monday. According to the Ministry of Commerce, the annual rate of inflation based on WPI for November stood at -1.99% over November 2014 and -0.17% over the corresponding month of the previous year and -3.81% compared to previous month. Commenting on the data, apex industry bodies, while welcoming the fall, also raised concern over decline in manufacturing produce. “Estimates of low wholesale price inflation in November is in line with the industry expectation and needs to be looked upon at by caution since it’s in the negative territory for last 13th month,” said the Associated Chamber of Commerce and Industry (ASSOCHAM). By meeting the conditions of budgeted WPI and Consumer Price Index, the Reserve Bank has given scope for further rate cut to substitute weakening global demand and pick up domestic investment cycle, noted the industry body. However, pass through of the recent depreciation of the rupee will have to be carefully monitored, it added. It believes, ‘moderate rise in minimum support prices of cereals, downward pressure on sugar and edible oil and benign crude oil prices and weakening global activity suggest that price will remain contained for a while’. Highlighting the decline in the price of manufacturing segment product, Federation of Indian Chambers of Commerce & Industry (FICCI) said the domestic demand needs to gather steam for investments to see a sustained improvement. “The corporate sector performance is yet to turnaround. The interest rates have to come down to more comfortable levels for investors to benefit and for consumers to consider spending. It remains imperative to pull all levers to thrust domestic demand,” said A Didar Singh, Secretary General, FICCI. “While the government has been keeping a tab on the food situation, we hope to see further momentum on agriculture sector reforms. It also remains imperative that the supply side bottlenecks are removed and leakages are plugged,” Singh added. According to the provisional data, while the combined index for group covering Food & Non-food articles and Minerals rose by 1.6% to 256.5 from 252.4, the index for Fuel & Power category rose by 0.9% to 177.9 from 176.4, followed by a 0.2% decline for the manufactured products group. The index for ‘Food Products’ manufacturing rose by 0.3% to 174.9 from 174.3 due to higher price of tea dust (blended) and mustard and rapeseed oil (3% each), sunflower oil, wheat flour (atta), maida, sugar, ghee and khandsari (2% each) and sooji (rawa), gola (cattle feed), cotton seed oil, rice bran oil and vanaspati (1%).  The index for ‘Beverages, Tobacco & Tobacco Products’ declined by 0.1% to 206 from 206.2 during the month due to lower price of zarda (4%) and dried tobacco (3%). Index for textile products rose by 0.3%, followed by Wood & Wood Products (+1.7%), Paper & Paper Products (-0.4%), Leather & Leather Products (-1.0%), Rubber & Plastic Products (-0.5%), Transport, Equipment & Parts (0.1%), Chemicals & Chemical Products (-0.1%) and Basic Metals, Alloys & Metal Products (-1.2%).  

December 15, 2015  | 04:15pm IST

The Dollar Business Bureau - Dec 15, 2015 12:00 IST
 
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