Wholesale prices continue to fall

Wholesale inflation in manufactured goods fell to -0.8 per cent in June from -0.6 per cent in May.

Bags of onions are displayed for sale at a wholesale market in Nashik, Maharashtra, India, on Oct. 23, 2013.

Wholesale Price Index (WPI) inflation dipped marginally in June 2015 to -2.4 per cent from -2.36 per cent in May, and 5.66 per cent in June 2014.

This marks the eighth consecutive month of wholesale price inflation being negative.

“Coming close on the heels of a moderate rise in retail prices, the inching down of WPI inflation is sure to lift market sentiment. The decline in wholesale price inflation is attributed to the deceleration in food prices even as there is a marginal uptick in fuel and power inflation,” said Chandrajit Banerjee, Director General, CII.

Primary articles inflation remained the same in June as its level in May, at -0.7 per cent. However, within this category, food articles inflation fell to 2.9 per cent compared to 3.8 per cent in May.

Wholesale inflation in manufactured goods fell to -0.8 per cent in June from -0.6 per cent in May. “The fall in manufacturing prices point to demand conditions which are yet to become robust,” said Mr. Banerjee.

Even the Index of Industrial Production figures show that manufacturing output is slowing, with May growth at 2.2 per cent. This is slower than the provisional figures for April, at 5.1 per cent, and even the revised figures for that month of 4.2 per cent.

“IIP numbers remain volatile and there is a critical need to firm up industrial growth. The demand situation in the economy is still weak and industries across sectors are operating at sub-optimal capacity. We hope that the Reserve Bank would maintain its accommodative stance in the third bi-monthly statement for 2015-16 to be announced next month,” said Jyotsna Suri, President, FICCI.

Going forward, Dr. Suri said that “the pickup in monsoons in June augurs well for agri-production in the coming months. Inflation is expected to remain range bound and within Reserve Bank of India’s (RBI) indicative trajectory this fiscal year.”

Mr. Banerjee feels that the near static price line and benign inflation outlook should propel the RBI to continue with its rate easing cycle in its forthcoming monetary policy to support investment and consumption demand, especially as industrial production has remained muted and the consumer goods sector has moved into the negative terrain in May.