NEW DELHI: Food and fuel inflation fall in September has helped cool the wholesale inflation, which grew by only 2.6% in September as against 3.24% in August this year.
It should reduce the concerns and apprehensions of Reserve Bank of India, of a possible 4% inflation in the third quarter. RBI’s Monetary Policy Committee (MPC) in October has suggested that retail inflation could be about 4.2-4.6 percent during October-March as against its earlier projection of 4-4.5 per cent, but still below its medium-term target of 4 per cent.
The September inflation numbers should give some reason for RBI to cut the rates. It may also choose to wait for October-November numbers, says experts.
“It is a good (lower inflation) and will give banks a bit more elbow room to cut down on its lending rates, that will help consumers a lower EMIs,” says Pramode Kant director Green Economy.
Wholesale inflation rate, measured by Wholesale Price Index, measures the prices in the wholesale markets where traders do the bulk purchases, but it also indicates prices the consumer at the kirana shop will pay.
“WPI does not represent the services which is 60 per cent of GDP. With GST impacting the prices of services, it does not reflect the true inflation,” says Arun Kumar, Economist.
The price data released by the commerce ministry on Monday showed that prices of vegetables fell to 15.48 percent, from 44.91 percent in August. In terms of food inflation index fell to 1.99 percent from 4.41 percent a month ago.
Supporting the lower food
Inflation, fuel and power inflation also dropped to 9.01 percent as against 9.99 percent in August.
“This is because of the government lowering the tax on fuel prices.but public is feeling the pinch of high rise in 104 services like restaurants and transportation. Input credit has not been taken into account as yet and even on MRP shop owners are slapping 18%...so inflation is much higher that the numbers show,” says Kumar.
But with growth in the industrial production at a nine-month high of 4.3 per cent in August, mainly on account of good performance of mining and power sectors coupled with higher capital goods output, there is a hope of RBI lowering rate and banks passing it on to consumers.
“...given the moderation in both CPI and WPI inflation, the RBI should resume the rate easing cycle in its next monetary policy announcement to give a fillip to demand, “ said Chandrajit Banerjee, Director General, CII.