As wholesale inflation dips further, India Inc. seeks rate cut

New Delhi, April 15:

Even as onion prices continued to bring tears to consumers, India’s annual rate of wholesale inflation decelerated for the fifth successive month in March, thanks mainly to a sharp dip in fuel prices, prompting India Inc. to seek rate cuts by the central bank.

As per commerce ministry data on wholesale price index (WPI) released Wednesday, the inflation rate declined to (-)2.33 percent (March 2015 over March 2014) from (-)2.06 percent for the previous month.

The development was quickly seized by industry chambers to suggest the Reserve Bank of India can now consider a further cut in its lending rates to help in the recovery that is taking place in the manufacturing sector, as both the wholesale and retail inflations were on a downswing.

As per the latest inflation data, prices of onions in March this year were still higher by as much as 36.49 percent, while pulses, vegetables and fruits were dearer respectively by 13.22 percent, 9.68 percent and 7.48 percent. Fuel prices were sharply down.

Among the three major groups which form the general index, the index for primary articles rose a tad to 0.8 percent for the period under review, while those for the manufactured goods and fuels dropped to (-)0.19 percent and (-)12.56 percent, respectively.

Within the fuel and power segment, diesel was cheaper by 12.11 percent and petrol by 17.7 percent due to a dip in global crude oil prices, while LPG prices declined by 7.9 percent, the data showed.

In the manufactured products segment, it was a mixed bag. While cement and lime prices increased by 8.29 percent, that for sugar, leather products and iron products declined, respectively by 4.24 percent, 2.74 percent and 5.98 percent.

The official data showed that the month-on-month annual inflation has successively decelerated in the past six months — from 1.66 percent in October 2014 to (-)0.17 percent in November to (-)0.5 percent, (-)0.95 percent, (-)2.06 percent and (-)2.33 percent, respectively, in the next four months.

As per data on consumer price index released on Monday, inflation for March eased to a three-month low of 5.17 percent, due mainly to a drop in the prices of food articles.

The Reserve Bank of India (RBI), which has been urged by India Inc. to lower interest rates, in its monetary policy update had observed that the favourable effects of a low base year, which had led to a drop in retail inflation, had now dissipated.

“The still elevated levels of prices of protein-rich items such as pulses, meat, fish and milk kept food inflation from following the seasonal decline in prices of vegetables and fruits,” the RBI said on April 7.

“Inflation continues to remain moderate and has in fact declined when compared to the previous month. This should persuade the Reserve Bank to resume its rate-easing cycle to support growth,” said Chandrajit Banerjee, director general of Confederation of Indian Industry.

“The IIP (index for industrial production) numbers released last week reported a significant improvement in February which is encouraging,” said Jyotsna Suri, president of the Federation of Indian Chambers of Commerce and Industry (Ficci).

“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,” the Ficci president said. (IANS)