Saturday 20 / April / 2024
New Delhi: Wholesale inflation eased to 3.57 per cent in September, reversing its seven-month uptrend, as good monsoon helped cool food prices, prompting the industry to demand interest rate cut to boost economic activity.
The wholesale price index-based inflation, reflecting the annual rate of price rise, stood at 3.74 per cent in August. In September 2015, WPI inflation was (-)4.59 per cent. On Thursday, the official data had showed retail inflation falling to 13-month low of 4.31 per cent in September.
After the release of WPI data, industry chambers gave accolades to the Reserve Bank for the 0.25 percentage point reduction in interest rate last week.
"It can be said that the anti-inflationary supply side measures of the government have been successful and rising inflation has been brought under control. In this context, the RBI governor needs to be congratulated for lowering rates in anticipation of a benign inflationary outlook," Confederation of Indian Industry said.
Wholesale inflation had been on a rise since February this year. During September, WPI inflation in vegetables witnessed deflationary pressures and was recorded at (-) 10.91 per cent. Inflation in this category had scaled a high of 28.45 per cent in July. This was aided by inflation for onion, which was at (-)70.52 per cent.
Pulses inflation continued to rule high at 23.99 per cent in September, according to the Commerce Ministry data. Potato, a daily consumable vegetable, witnessed maximum inflationary pressure at 73.31 per cent. Prices of fruits rose 14.10 per cent during the month. Overall, the food inflation basket showed good moderation with inflation at 5.75 per cent in September, as against 8.23 per cent in August.
Federation of Indian Chambers of Commerce & Industry said good monsoon and government action helped in abating the price level and indication are there that prices will remain benign.
"We do hope that going ahead banks will take a cue and further translate this into lower lending rates which is one of the key factors that can help boost IIP which continues to remain dismal," Ficci said.
India Ratings and Research said that both retail and WPI moderated in September primarily led by softening food prices.
"The trend is along expected lines and Ind-Ra believes it is likely to continue in the next month." The all-powerful Monetary Policy Committee headed by RBI Governor Urjit Patel last week cut benchmark interest rates by 0.25 per cent to 6.25 per cent. While he had signalled more tolerance towards inflation, the easing of CPI data was in line with the RBI's forecast for average 5 per cent inflation in fourth quarter of 2016.
This, many expect, would create more room for interest rate cuts. Reasoning the rate cut, RBI had said: "The government has announced several measures to cool food inflation pressures, especially with regard to pulses. These measures should help in moderating the momentum of food inflation in the months ahead. This has opened up space for policy action".
The September inflation print for manufactured articles read at 2.48 per cent, as against 2.42 per cent in August. The rate of inflation in sugar was at 32.92 per cent and that for petrol was 1.25 per cent.
ICRA Senior Economist Aditi Nayar said despite flaring up of crude oil prices it expects WPI inflation to remain below 4 per cent in third quarter.
"Subsequently, WPI inflation is likely to rise to as much as 4.5 per cent in January-March 2017."
The WPI inflation for July has been revised upwards at 3.72 per cent, against provisional estimate of 3.55 per cent.
