Days after retail inflation softened and industrial production recorded a three-month high, headline inflation or wholesale price index (WPI) based inflation, dipped on Friday to a five-year low of 1.77 per cent in October 2014, thus raising hopes of a rate cut by the Reserve Bank of India (RBI) next month to fuel economic growth.
The WPI inflation fell mainly due to softening prices of fuel and food items. The decline in headline inflation was from 2.38 per cent in September this year. It fell for the fifth month in a row, and had stood at 7.24 per cent in October 2013.As per the official data, food inflation fell to a nearly two-and-half year low of 2.7 per cent. Food inflation is on decline since May.Reacting on the inflation numbers Finance Minister Arun Jaitley said, “decline in global crude prices should further help in improving the price situation.”
"We believe that softening of prices is in our interest. With crude prices down, this trend of lower food prices will continue,” he added.Inflation in the fuel and power segment which include lPG, petrol and diesel declined to 0.43 per cent as compared to price rise of 1.33 per cent in September.With the international crude prices declining further to a four year low of $77 a barrel, the inflation in fuel segment is likely to soften in the coming days.
Encouraged by the decline in inflation, India Inc has stepped up its demand for a cut in interest rates by the RBI in next bi-monthly monetary policy on December 2.
"The inflationary expectations are fairly tamed and we see no immediate upside risks with regard to prices. Given that, it is important to reiterate that demand remains subdued. The consumer durables segment reported negative growth for the fourth consecutive month in September 2014. It is extremely imperative that all levers are used to pep up demand," Ficci Secretary General A Didar Singh said.
Industry has been demanding a rate cut to boost growth which had slumped to 4.7 per cent in 2013-14. In the current fiscal, the growth is estimated to be between 5.4-5.9 per cent. It will, however, be much below the potential growth rate of 8-9 per cent.