Lower fuel prices bring down India’s wholesale inflation further

Lower fuel prices bring down India’s wholesale inflation further

15Fir02.qxpNew Delhi, March 16 India’s annual rate of inflation, based on wholesale prices, declined further to (-) 2.06 percent for February from (-) 0.39 percent for the month before thanks to a 14.72 percent drop in the index for petroleum fuels and power, official data showed Monday.

Among the other two major indices, the index for primary articles rose marginally 1.43 percent and that for manufactured products was up 0.33 percent, as per data on the official wholesale price index (WPI) released by the commerce and industry ministry.

The country’s retail inflation, based on the consumer price index, also showed a decline of 5.37 percent in February against 7.88 percent in the like month of last year. But on month-on-month basis, the retail inflation was higher over the figure of 5.19 percent for January 2015.

The prices of liquefied petroleum gas (LPG) fell by 8.86 percent, petrol became cheaper by 21.35 percent and diesel prices came down by 16.62 percent. The food inflation in the month under review grew by 7.74 percent from a rise of 8.00 percent recorded in January 2015.

Prices of major food articles like wheat, rice, cereals, vegetables, potatoes, fruit and milk fell in the month under review.

According to the data, wheat prices decelerated by 2.40 percent from a negative growth of 1.63 percent in January 2015. Rice prices grew by 3.80 percent from 4.00 percent in January 2015.

Cereals were costlier by 1.39 percent in February 2015 from 1.65 percent in January 2015. Vegetables were dearer by 15.54 percent from a growth of 19.74 percent in January this year.

Prices of potatoes contracted by 3.56 percent from a rise of 2.11 percent on a month-on-month basis. Milk prices accelerated by 7.3 percent from a rise of 9.3 percent in January 2015.

However, onion prices rocketed by 26.58 percent in February from a decline of 1.90 percent month-on-month basis. Egg, fish and meat inflation grew by 1.27 percent from a fall of 1.51 percent in January 2015.

Meanwhile, India Inc. said that the wholesale price index which has moved further into the negative territory, for the fourth consecutive month, is along the anticipated trajectory.

“The decline in prices of manufacturing goods point to fragile demand conditions and indicates that robust recovery has yet to set in,” said Chandrajit Banerjee, director general, Confederation of Indian Industry (CII).

“CII hopes that the forthcoming monetary policy would continue to be supportive of growth. CII is hopeful that the Reserve Bank of India (RBI) would cut policy rates by 100 basis points during the course of the year,” said Banerjee.

The RBI is scheduled to announce its first bi-monthly policy review for 2015 on April 7.

Another business lobby – Federation of Indian Chambers of Commerce and Industry (Ficci) – said that the subdued global commodity prices have aided to the softening of the inflation trend in India

“Government and the RBI should also engage with the banks to ensure that the lowering of policy rates already effected is passed on to the investors and consumers in the form of lower lending rates,” said A.Didar Singh, secretary general, Ficci.

According to Singh, prices of vegetables, fruits and pulses have remained in the double digits due to the unseasonal rains.

“In this context we expect to see implementation of the government’s announcement to work with states to create a unified national agriculture market,” Singh added.

The Associated Chambers of Commerce and Industry of India (Assocham) said that re-energizing of the manufacturing sector is imperative and that the overall focus must now shift to reviving GDP expansion, industrial growth and boosting consumer and investor sentiments.

“The chamber feels that the latest WPI figures raise some concerns for the manufacturing sector in particular and would require some focus from the policymakers to boost the demand for the same,” said Rana Kapoor, president, Assocham.

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