The broad based slowdown in inflation trajectory is likely to continue amid declining global oil prices...
The broad based slowdown in inflation trajectory is likely to continue amid declining global oil prices and the headline WPI inflation is expected to remain range bound at 1.8-2 per cent during November, says a report.
“The downward spiral in global crude oil prices along with the base effect has provided some relief to the government which has been struggling to keep the inflationary pressures at bay,” Dun & Bradstreet India Senior Economist Arun Singh said.
According to the report, going forward, inflationary pressures in some items may increase due to slight improvement in demand. Moreover, waning of base effect might also lead to reversal of inflation rate.
D&B expects the headline WPI inflation to remain range bound at 1.8 per cent- 2 per cent during November 2014.
“Estimated lower food crop production during this year along with waning base effect has the potential to reverse the inflation rate,” Singh said.
The report noted that falling inflation levels should not divert the government’s attention from focusing on addressing supply-side measures to tackle prices as only sustainable easing of inflation and inflationary pressures will make RBI decide in favour of bringing down policy rate.
“While the Government has no doubt taken steps towards ushering in fiscal discipline and creating an environment conducive to business, structural reforms and monetary policy needs to move in tandem to shift the economy back on the path of sustainable growth,” the report said.
Driven by softening prices of fuel and food items, the WPI inflation cooled to a five year low of 1.77 per cent in October.
The decline in Wholesale Price Index (WPI) based inflation stood at 2.38 per cent in September.
Retail inflation hit a record low of 5.52 per cent in October.
The WPI inflation, which fell for the fifth month in a row, was at 7.24 per cent in October 2013.