Falling inflation revives hope for interest rate cut by next month
The Wholesale Price Index (WPI) for July released on Friday showed negative trend for the ninth month in a row, registering a fall of 4.05% mainly due to cheaper oil and other commodities. According to the latest government data, WPI stood at -4.05% for the month of July, 2015 as compared to -2.40% for the previous month and 5.41% during the corresponding month of the previous year. The Consumer Price Index (CPI) released on Wednesday also saw a decline of 3.78% last month. Apart from the inflation data, the Index of Industrial Production (IIP) which measures the manufacturing output has also recorded growth of 3.8% during June. These figures are key indicators of the economy and form the basis for the central bank to determine the country’s monetary policy. Indian industries hope that the deflating trend will lead to a reduction in key interest rates by the Reserve Bank of India (RBI) in its next monetary policy review to be held on September 29. “These numbers when looked at alongside figures of industrial performance make a good case for further cuts in the policy rate by RBI and we hope the central bank would continue moving in that direction after its brief hiatus followed by transmission by an equivalent amount by banks in the form of lower lending rates,” said Jyotsna Suri, President of the Federation of Indian Chambers of Commerce and Industry (FICCI). As per the wholesale price data, the index for food articles declined by 0.6% to 255.7 from 257.3 in June due to lower price of fruits and vegetables, jowar and poultry chicken, egg, fish and other items. However, the price of pulses, meat and tea has witnessed an increase of up to 5%. The index for non-food articles fell by 1.3% to 215.6 from the level of 218.5 in the previous month. The deflation in this category was led by the prices of raw silk, copra, guar seed, soyabean, rubber and other items. Similarly, the index for fuel and power category also witnessed a fall of 2% from 191.0 in June to 187.1 in July, mainly due to lower price of furnace oil, aviation turbine fuel, high speed diesel and petrol. “With oil prices remaining range bound and commodity prices being subdued, the issue of imported inflation too is not much of concern presently. Promoting growth should therefore take precedence at this juncture”, Suri added.
August 14, 2015 | 3:41pm IST.
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