A steep fall in prices of potato, onion, minerals, and high speed diesel, kept the Wholesale Price Index (WPI) in the negative zone, apex industry body ASSOCHAM said on Monday.
“While the inflation is within the target level of government and RBI, the focus of the policy-makers should now shift to revive GDP and industrial growth, especially the poor performance of manufacturing sector, consumer non-durable goods and capital goods as seen in the recent IIP numbers needs to be looked into immediately,” said Sunil Kanoria, president, The Associated Chambers of Commerce and Industry of India (ASSOCHAM).
Retail prices continue to benign in coming months due to the effect of unseasonal rainfall on coming Rabi season resulting from western disturbances. But the RBI needs to look at generalised deflationary pressures that the CPI may not adequately capture, according to Kanoria.
The chamber stated that since the Government of India had shown its commitment to stick to fiscal consolidation path, therefore, it gave the room to RBI to ease liquidity and reduce interest rates to dispense with deficient demand in the economy.
ASSOCHAM also advocates that factors which strengthen the idea of reducing the key policy rates are, bringing down the interest rates to zero by European Central Bank, quantitative easing programme ramped by the Central Bank of Japan, Denmark, China, and ECB, fall in IIP numbers for last three months, low credit growth, low export growth, increase in demand of dollar putting pressure on Indian rupee and negative sentiment in the Indian banking system towards corporates due to rising NPAs and defaults.
India’s wholesale prices fell for the 16th straight month in January, declining to -0.91% for the month of February, 2016, over February, 2015, as compared to -2.17% that was seen during the corresponding month of the previous year.
Going by the sectoral composition, pulses that are within primary articles have shown upward price pressure continuously for the past five months which policy-makers should check and address through supplyside responses.
