India Inc Asks RBI to Cut Rates on Inflation Data

With WPI or wholesale price index inflation turning negative for the second time in three months, India Inc today exhorted the RBI to take full advantage of the benign price rise situation by slashing interest rates in a bid to boost demand and revive industrial growth.

"Given the continuing trend of moderate inflation both at the wholesale and retail level and the fact that a durable recovery in the industrial sector is still out of sight, we hope that the central bank would continue with the policy rate cut cycle after the forthcoming budget?," Ficci President Jyotsna Suri said.

Wholesale inflation turned negative for the second time in three months as fall in petroleum and food prices dragged it to a five-and-a-half year low of (-) 0.39 per cent in January.

"Full advantage of the low pricing situation can be taken only if interest rates are reduced by at least 100 basis points and industrial growth revived so that the investment cycle can be revived," Assocham President Rana Kapoor said.

Inflation measured on wholesale price index (WPI) was at 0.11 per cent in December. The data for November was revised downwards to a negative (-)0.17 per cent, from the provisional estimate of zero.

PHD Chamber President Alok B Shriram said inflation in the negative trajectory will be demand inducing and a major relief for the manufacturers.

"At this juncture, a significant rate cut by the RBI becomes inevitable to boost up the demand scenario vis-a-vis easy availability of credit to the various consumers and producers' segments," he said.

However, food inflation witnessed a rising trend in January and scaled to a six month high of 8 per cent, as per the government data released today.

Inflation in pulses, vegetables and cereals was higher in January over the previous month.

"We do see an increase in the prices of certain food items such as pulses and vegetables and the same was also reflected in the recently released data for Consumer Price Inflation. This is largely the result of structural rigidities that have marred the food supply chain and we hope to see the government take further measures to iron out such kinks in the agri-commodities supply chain," Mr Suri said.

RBI Governor Raghuram Rajan, in the monetary policy review earlier this month, kept the key interest rate unchanged saying the apex bank wanted more comfort on inflation front as it awaited cues from Finance Minister Arun Jaitley's first full year Budget.