Industry calls for rate cut as inflation dips further

However, most analysts are of the view that RBI is unlikely to cut interest rates in December during monetary policy review despite low inflation and poor growth. Inflation was at 2.38 per cent in September. The drop in WPI inflation has been broad based as all the three major components primary commodities, fuel and power and manufactured products —witnessed a decline in October 2014.

Finance minister Arun Jaitley expressed the hope that the trend of lower prices will continue due to decline in global crude prices. “We believe that softening of prices is in our interest. With crude prices down, this trend of lower food prices will continue,” said Mr Jaitley.However, he cautioned that it has to be seen how the oil price will move going forward. “We should not be overtly optimistic at this time,” Mr Jaitley said.

Notwithstanding the finance minister’s caution, industry bodies have stepped pressure on the RBI to slash its interest rates as such move was essential to stimulate demand and perk up investments.“This provides sufficient room to the RBI to review its prolonged pause in policy rates and move towards policy easing in its forthcoming monetary policy especially as investment and consumption demand are yet to show visible signs of a pick-up,” CII director general Chandr-ajit Banerjee said.

“The inflationary expectations are fairly tamed and we see no immediate upside risks with regard to prices. Given that, it is important to reiterate that demand remains subdued. The consumer durables segment reported negative growth for the fourth consecutive month in September. It is imperative that all levers are used to pep up dema-nd,” Ficci secretary general A Didar Singh said.