Inflation at 5-yr Low on Cheaper Food

Published: 15th October 2014 06:00 AM  |   Last Updated: 14th October 2014 10:46 PM   |  A+A-

NEW DELHI: The Wholesale Price Index (WPI) dipped to  a five-year low of 2.38 per cent in September aided by softening of food and fuel prices. This has raised hopes of Reserve Bank cutting key policy rates earlier than expected to boost demand and spur industrial growth. The WPI-based inflation was at 3.74 per cent in August and 7.05 per cent in September 2013.



The drop in WPI inflation comes at the back of retail inflation declining to a record low of 6.46 per cent in September.

According to government data released on Tuesday, food inflation was at a 33-month low of 3.52 per cent. The data further revealed that inflation in milk, eggs, meat and fish continued to decline in September as well. However, there was a marginal increase in the prices of fruits during the period.

Inflation in manufactured products, like sugar, edible oils, beverages and cement also fell, declining to 2.84 per cent in September as against 3.45 per cent in the previous month.

Wholesale inflation in onion contracted to 58.12 per cent in September as compared to a contraction of 44.7 per cent in the previous month.

While inflation in vegetable basket as a whole shrunk to 14.98 per cent in September, rate of price rise in potato was at 90.23 per cent from 61.61 per cent in the previous month.

“It is heartening to note that we have been able to bring food inflation under control. Growth in vegetable and protein prices that have been contributing to the recent increase in inflation rates have shrunk, thanks to the steps taken by the government,” Finance Minster Arun Jaitley said.

Expressing the government’s commitment to continuing food market reforms to improve supply responses, he said: “We are confident that soon we will be achieving a low and stable inflation.”

Trade chambers see a ray of hope for rate cuts.

Industry body CII said going forward, the downslide in global commodity prices led by fuel together with other factors should help contain inflation. “This would provide space to RBI to review its cautious stance on interest rates.”

The decline in inflation is getting broad based and indicates inflationary pressures waning as of now, according to another trade chamber Ficci.

“...the prices are expected to remain moderate. CPI inflation is moving in consonance with RBI’s target rate and this should bring in some breathing space,” the chamber said.


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