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Wholesale inflation dips to record low; will RBI cut rates?

With wholesale (WPI) inflation winding down to record low of (-) 2.33 per cent in March, the industry today said the trend is a clear pointer to the RBI to slash key rates further to revive consumer confidence and boost investment, crucial to kickstart growth.

business Updated: Apr 15, 2015 18:51 IST

With wholesale (WPI) inflation winding down to record low of (-) 2.33 per cent in March, the industry today said the trend is a clear pointer to the RBI to slash key rates further to revive consumer confidence and boost investment, crucial to kickstart growth.



Deflation persisted for the fifth straight month on account of cheaper food and fuel products as well as manufactured items.



"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."



Inflation measured as the wholesale price index (WPI) stood 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 came in at 6 per cent in March 2014.



"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.



"Further, the IIP numbers released last week reported a significant improvement in February 2015, which is encouraging. Going ahead, it will be imperative to support this buoyancy to assure a sustainable turnaround in the industrial sector. We look forward to another round of downward revision in the repo rate in June 2015 or perhaps earlier," added Suri.



Deflation was also visible in the manufactured products category where the rate of price rise dropped to a record low of (-) 0.19 per cent.



Inflation in food article category stood at 6.31 per cent, and for fuel and power, it was (-) 12.56 per cent.



"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.



The decline in inflation and a positive industrial output data would give room to the Reserve Bank to consider a cut in interest rates.