Wholesale inflation eases to 3-month low of 3.58%

India Inc demands rate cut; wants petrol, diesel under GST

Wholesale price-based inflation (WPI) has cooled in December, 2017 to a three-month low of 3.58% thanks to the decline in prices of food items, according to data released on Monday by the Commerce and Industry Ministry.

This prompted India Inc to demand lowering of interest rates. In November, the annual rate of inflation based on monthly WPI, was 3.93% (provisional), while in December 2016 it was 2.1%. Inflation in food articles eased to 4.72% in December 2017 from 6.06% in November 2017.

“As inflation numbers are being driven largely on account of supply side factors, we urge the Reserve Bank of India to calibrate its monetary policy stance giving equal weightage to growth consideration. Lowering of repo rate in the upcoming monetary policy is critical to boost investments and build growth momentum at this juncture,” said Rashesh Shah, president, FICCI.

He also sought measures in the Union Budget to strengthen the agriculture supply chain for effective management of food prices, as well as inclusion of petrol and diesel under the Goods and Services Tax regime to help lower the pressures of fuel inflation.

Consumer price index -based inflation had surged to a 17-month high of 5.2% in December due to increased inflation in food, housing and personal care items. The RBI factors in CPI-based inflation while taking a call on key policy rates. It had maintained key interest rate (repo rate at 6%) in its December policy review. It had raised inflation forecast for the second half of the ongoing fiscal to 4.3-4.7% (up by 0.1 percentage point) (owing to global crude oil prices as well as implementation of the seventh Pay Commission suggestions). Meanwhile, WPI for October was revised upwards to 3.68% from the provisional estimate of 3.59%.

“Upward pressure on price could ensue in case rabi production falls short especially for wheat and mustard and the nearly 3% decline in kharif crop output. In addition, the sustained rise in global commodity prices could further aggravate prices,” CARE Ratings said in a statement. “We expect wholesale inflation to be around 4% for the remainder of the fiscal,” the rating agency added.