Continuing the deflationary trend for fifth month in a row, 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 of India (RBI). 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. 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. “The latest numbers indicate moderation in food prices even though possibility of upside risks from unseasonal rains remain 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,” FICCI President Jyotsna Suri said.
“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,” Ms. 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 RBI, 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.
“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.”
“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
