Food Fuels Dec Inflation, WPI Crawls Up

Declining prices of global crude oil raise the clamour for interest rate cut by RBI to boost domestic manufacturing and spur economic growth

Published: 15th January 2015 06:00 AM  |   Last Updated: 15th January 2015 06:00 AM   |  A+A-

NEW DELHI: Inflation is back albeit marginally at 0.11 per cent in December on the back of increase in food prices, which reverses the declining trend. Inflation based on the Wholesale Price Index (WPI) was at zero in November.

Food-1.jpgThe food inflation in December moved to a five-month high of 5.2 per cent, as per the government data released on Wednesday.

Inflation was aided by a spurt in the price of pulses, vegetables and fruits, which was higher in December than what was recorded in November.

Price rise in wheat, milk, and protein rich items like egg, meat and fish was slower  in December when compared to November.

According to the government data, the contraction in WPI inflation for petrol was steeper at 11.96 per cent from 9.96 per cent in November. Similarly the rate of decline in diesel prices during December was higher than in the previous month. Inflation in the primary articles segment inched up to 2.17 per cent in December against a decline of 0.98 per cent in November.

Meanwhile, the government has revised downwards the October WPI inflation to 1.66 per cent as against the earlier estimate of 1.77 per cent.

However, sluggish revenue collections has led fiscal deficit go up to 99 per cent of the full-year target in the first eight months of the financial year. The high fiscal deficit could lead to the much anticipated rate cut being pushed ahead. The Reserve Bank of India is expected to announce its monetary policy review on February 3.

Food.jpgIndustry and the common man are anticipating a rate cut as inflation looks to be well within the ambit of the apex banks’ “comfort level” but a poor fiscal health could have an adverse effect on rate cut, if any.

 Notwithstanding the marginal rise in December inflation, India Inc said low oil prices and measures undertaken by the government are likely to keep inflation under check, even as it reiterated the need for an interest rate cut by the RBI to kick start growth.

“Given the slow pace of global recovery and expectations of oil prices to remain at low levels going forward, inflation is expected to remain under control,” said Ficci President Jyotsna Suri.

“To give a boost to the capex cycle, there is an urgent need for lowering of lending rates. Since the inflation is largely under control, we urge the RBI to ease the monetary policy,” she added.

CII Director General Chandrajit Banerjee said the industry body hopes that the “conducive inflationary situation” would spur RBI to move away from its inflation-centric approach to “policy making and focus on rejuvenating growth in the economy and industry, in its forthcoming monetary policy”.

“Policy makers need to cut the interest rates in order to induce the producers to augment the supply of goods and services on one hand and increase the domestic demand on the other,” Assocham Secretary General D S Rawat said.

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