No inflation in India!

Data suggests no price rise in November compared to year ago period

New Delhi: Inflation, based on wholesale price index (WPI) touched zero level in November, which will put pressure on the RBI to cut interest rates to boost manufacturing. This is the lowest level of inflation in the last 5 years and it was pulled down by a fall in vegetable and fuel prices. Inflation was at 1.77 per cent in October. Compared to last year the vegetable prices contracted by 28.57 per cent and onions by 56.28 per cent. Petrol prices were also down by 10 per cent.

However, potato prices shot up by 34.10 per cent while fruit prices were up by 14.78 per cent and milk by 10 per cent. Even the prices of protein-based items like egg, meat and fish rose by 4 per cent. In line with WPI inflation, retail inflation based on CPI for November had also fallen to an eight-year low of 4.4 per cent, as per the data released last week.

“While WPI inflation may remain sub 1.5 per cent in the remainder of 2014-15, food inflation is expected to print at elevated levels. With monetary policy focused on the medium term trajectory of CPI inflation, Monday’s lower than expected WPI print is unlikely to hasten rate cuts (by RBI),” said Aditi Nayar, senior economist, ICRA. She said that the month on month rise in protein items including pulses and non-vegetarian items in November may continue in the near term, and remain the chief risk for the food inflation trajectory.

However, industry was quick to demand a cut in interest rates.“The continuous downtrend in both WPI and CPI seen over the past four/five months is a positive signal towards stabilisation of prices. While the issue of inflation is being handled well, the sharp dip in manufacturing growth reported in the latest monthly IIP (index of industrial production) release is a matter of concern. This needs to be tackled on a war footing,” said Sidharth Birla, president, FICCI.

“In addition, the global recovery remains scattered and this is reflected in our export growth which was seen waning in the past few months. Amidst the current situation, a cut in the interest rates will at least provide some impetus to domestic demand,” added Mr Birla.

( Source : dc correspondent )
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