In line with CPI, the Wholesale Price Index (WPI) inflation for the month of September dipped to levels of 3.57% versus 3.74% in August. Build up inflation rate in the financial year so far was 4.28% compared to a build up rate of 0.23% in the corresponding period of the previous year. The index for ‘Food Articles’ group declined by 1.6 per cent to due to lower price of urad (12%), arhar, moong and poultry chicken (8% each), masur (5%), fruits & vegetables (4%), mutton and bajra (3% each), fish-marine and gram (2% each) and condiments & spices, barley and egg (1% each). However, the price of fish-inland and tea (2% each) and jowar, coffee, ragi, wheat and milk (1% each) moved up.
The Consumer Price Index (CPI) inflation has dipped sharply to a one-year low of 4.31% compared to 5.05% in August. The decline has largely been on account of food inflation which dipped to 3.88% as against 5.91% in August. Both rural and urban inflation have dipped significantly to levels of 4.96% and 3.64% compared to 5.8% and 4.22% respectively in August.
Most analysts have cheered the steep decline in inflation and believe that this opens room for the RBI to cut repo rate by another 25 basis points in this fiscal. This means that consumers have reason to cheer, for not only food lower inflation free up more money in their budgets, the possible rate cut would give banks greater flexibility to lower interest rate, translating into lower personal, car and home loan EMIs!
The Monetary Policy Committee (MPC), led by new RBI governor Urjit Patel, had last week cut the repo rate by 25 basis points. This was the first policy review under the MPC, which is a 6 member committee, that decides on the monetary policy course. MPC’s main aim is inflation targeting. The RBI and government have agreed on a target of 4% for the duration starting from August 5, 2016 to March 31, 2021