WPI inflation falls (-)2.65% in Apr; industry demands rate cut

Deflationary pressure persisted for the sixth month in a row as fall in prices of fuel and manufactured items pulled inflation to a new low of (-)2.65 per cent in April, prompting industry to demand a rate cut by the Reserve Bank.

Inflation, as measured on the Wholesale Price Index (WPI), has been in the negative zone since November, 2014. In April last year, it was 5.55 per cent.

The deflationary trend has bolstered the case for a rate cut by RBI as retail inflation has also eased and industrial production is down, experts said.

When asked if he expects the RBI to cut rates at its June 2 monetary policy review, Finance Minister Arun Jaitley said: “I expect what every Indian expect.”

As per the data released today, manufactured products witnessed deflation for the second consecutive month in April as inflation dropped to a record low of (-)0.52 per cent.

Inflation in food articles category stood at 5.73 per cent, as against 6.31 per cent in March. Fuel and power inflation was (-)13.03 per cent in April.

Industry chambers raised clamour for lower interest rates, saying the data provides ample space for RBI to slash the key policy rate to fuel investments and propel growth.

ICRA Senior Economist Aditi Nayar said: “The data reinforces our expectation of a high probability of 0.25 per cent rate cut in June 2 RBI policy.”

The February WPI inflation has been revised downwards to (-)2.17 per cent as against the provisional estimate of (-)2.06 per cent.

On the macro economic condition, Jaitely said it has improved. “Economy is in a recovery stage. Inflation is under control, growth is better, fiscal deficit, current account deficit is under control… From despondency we have entered a positive zone.

[“source-business-standard.com”]