With cheaper manufactured goods and food items, inflation touched a record low of (-)2.33 per cent in March against (-)2.06 per cent in previous month. The deflationary trend, experts say, will definitely prompt the industry to renew its demand for further rate cut by the Reserve Bank. "Going ahead, it will be imperative to support this buoyancy in factory output to assure a sustainable turn around in the industrial sector. We look forward to another round of downward revision in the repo rate in June 2015 or perhaps earlier," Ficci President Jyotsna Suri said.
Inflation in manufactured items slipped in to the negative territory, reflecting poor offtake of goods. Wholesale Price Index (WPI) based inflation has been in the negative zone since November 2014 mainly on account of cheaper food and fuel products. As per Government data released on Wednesday, it was at (-)2.06 per cent in February, (-)0.39 per cent in January, (-)0.50 per cent in December and (-)0.17 per cent in November. It was 6 per cent in March 2014.
The Reserve Bank India (RBI), which has reduced repo rate by 0.5 per cent since January, refrained last week from further cut in its first bi-monthly monetary policy review in the current fiscal. The next review is due on June 2. Experts said the RBI is likely to place greater emphasis on retail inflation numbers, than the path charted by the one based on WPI. "The sub-zero print for core-WPI inflation in March would have a limited impact on the timing and magnitude of rate cuts by the RBI. We continue to expect repo rate cuts to be limited to 0.50 per cent in the remainder of this calendar year," ICRA Senior Economist Aditi Nayar said.
Deflation in the manufactured products category was at (-)0.19 per cent, the lowest in over five years. last time the rate of price rise in manufactured items had contracted in July 2009 at (-)0.2 per cent. Inflation in food articles category stood at 6.31 per cent, and for fuel and power, it was (-)12.56 per cent. With the decline in both wholesale and retail inflation, industry chambers have renewed their demand for further rate cut by the RBI to give a boost to manufacturing sector.
Retail inflation, based on Consumer Price Index released last week fell, to a 3-month low of 5.17 per cent in March on the back of easing food prices. Industrial output growth jumped to nine-month high of 5 per cent in February on better performance of manufacturing sector and higher offtake of consumer and capital goods.
The January WPI inflation data has been revised downwards to (-)0.95 per cent as against the provisional estimate of (-)0.39 per cent. The data also showed that inflation in onions, milk and protein-rich items like egg, meat and fish inched upward, vegetables and fruits saw the rate of price rise decline during the month. The rate of price rise in potato saw the steepest fall at (-)20.66 per cent in March, while for wheat it was (-)1.19 per cent.