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Cheaper veggies take Jan WPI to 8-month low

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SummaryAnnual wholesale price inflation fell sharply to an eight-month low of 5.05%...

Aptly timed for the ruling UPA that bore the brunt of public anger in recent state assembly elections over persistently high inflation for over three years in a row, the key economic indicator has shown a steep improvement. Annual wholesale price inflation fell sharply to an eight-month low of 5.05% in January from 6.16% a month earlier on easing prices of food, especially vegetables, industry ministry data released on Friday showed.

This, coming on the back of last monthís drop to a two-year low of 8.79% in retail inflation ó which is being accepted as the measure of nominal anchor by the Reserve Bank of India mulling inflation targeting ó has rekindled industry hopes of interest rate cuts in not-so-distant future.

While analysts said the RBI was unlikely to raise rates at its April review, the government said there could be a ďreal pushĒ to growth right now, an oblique reference to the monetary policy.

The Consumer Price Index (CPI) inflation stood at a 23-month high of 11.24% in November before falling sharply to 9.9% for December, and further to 8.79% in January.

However, an irritant is the inching up of the core WPI inflation (price rise in non-food manufactured items) for the fourth consecutive month through January to 3%, though it also remained range-bound. Some analysts also saw a possible spurt in vegetable prices in the summer months as a risk factor. These, most analysts felt, coupled with the lingering uncertainties about the impact of the US Federal Reserve tapering and the recent emerging markets sell-off on an already weak rupee will likely prompt the RBI to hold on to rates at its next monetary policy review meeting on April 1. The RBI is also expected to wait for the forecast of the monsoon for 2014, expected in late April-May, before trimming policy rates.

With the benefit of the latest inflation data, economic affairs secretary Arvind Mayaram said he hopes there would now be a real push to boost growth. GDP growth in the first half of this fiscal stood at 4.6% and the advance estimate for growth for the whole year is 4.9%. Industrial output has fallen 0.1% in the first nine months of this fiscal.

Analysts forecast WPI inflation, especially in food items, to remain subdued for the rest of this fiscal as well in view of an expected bumper rabi harvest. Moreover, since food items account for almost

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