WPI, retail inflation touch new lows bolstering rate cut hopes
September 14, 2015 | 10:20 PM
by PTI
Labourers load bags of pulses in a supply vehicle at a wholesale grain market in Ahmedabad, India, on Monday. India's wholesale prices tumbled for a tenth straight month in August, pressured by falling fuel costs, bolstering prospects of an interest rate cut by the central bank later this month. Photo - Reuters

New Delhi: The consumer as well as wholesale price inflation dived to new lows in August on falling global commodity prices, bolstering chances of an interest rate cut by RBI.

Consumer price inflation, RBI's benchmark, eased to 3.66 per cent in August from 3.69 per cent, while wholesale prices tumbled for a tenth straight month to minus 4.95 per cent compared with a provisional (-) 4.05 per cent in July.

The dip in inflation adds to pressure on RBI Governor Raghuram Rajan to cut interest rates for a fourth time this year.

Rajan, who has so far resisted pressure from the government as well as the industry on easing monetary policy, is to announce next bi-monthly policy on September 29.

The decline in inflation has been mainly on account of moderating prices of food items with the exception of onion and pulses.

This has sparked fears of deflation in the economy, which some economist argue would create further problems in the coming days.

Also of concern is drought-like situation with about half of the country witnessing deficient rainfall.

Commenting on the data, Finance Minister Arun Jaitley said: "During the monsoon period because of seasonal variations, (prices) of some products go up. But overall inflation continues to moderate and seems to be under control."

The wholesale inflation was (-)4.05 per cent in July. It has been in the negative zone since November 2014.

In August last year, it was 3.85 per cent.

Price rise in onions and pulses was at 65.29 per cent and 36.40 per cent respectively during August, as per the data.

Overall, WPI food inflation basket remained in negative territory for second month in a row at (-)1.13 per cent.

According to Economic Affairs Secretary Shaktikanta Das said: “RBI will take a considered call on the issue.There is no divergence in perception. The government and RBI are working together. Taking into account the overall factors, RBI will take a considered call.”

Das who reviewed the fiscal situation along with other secretaries in the Finance Ministry, said in a tweet: “Declining inflation numbers (are) in line with governemnt expectations.Should augur well for the economy.”

As regards CPI inflation, a slower rate of price rise in fruit and vegetables and protein items, except for pulses, pulled the inflation to a new low of 3.66 per cent in August, as against 3.69 per cent in July.

CPI food inflation during the month, however, rose slightly at 2.20 per cent as against 2.15 per cent in July.

Vegetable prices declined at (-)6.36 per cent during the month while fruits were cheaper at an inflation rate of 0.99 per cent.

Industry body CII said CPI inflation has also been declining, RBI needs to reduce interest rates sharply to drive a recovery in demand.

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