Rate cut chorus grows as wholesale, retail inflation touch record lows

Meanwhile, deflationary trend continued for the 10th month in a row with inflation plunging to a historic low of (-) 4.95 per cent in August on cheaper fuel and vegetables, putting pressure on RBI to cut interest rate. Wholesale price index inflation was (-) 4.05 per cent in July while retail inflation was revised downwards to 3.69 per cent from 3.78 per cent, according to official data released on Monday.

Commenting on the data, finance minister Arun Jaitley said that both categories of inflation indicate that inflation continues to moderate and seems to be under control. “Core Inflation (excluding food and fuels) decelerated to 4.1 percent in August 2015 from 4.3 percent in July 2015, continuing the momentum of decelerating core inflation,” he told reporters.

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The Reserve Bank of India is scheduled to meet on September 29 for its next bi-monthly policy review. While it has lowered rates by a total of 75 basis points since January, it maintained the status quo on rates in its last review as it monitored inflation data. Economic affairs secretary Shaktikanta Das said there has been a considerable improvement in the price situation. “The Reserve Bank of India will take a considered call on the issue. There is no divergence in perception. The government and RBI are working together. Taking into account the overall factors, Reserve Bank will take a considered call,” he said.

However, the data revealed that food inflation rose marginally on consumer food price index in August at 2.20 per cent as against 2.15 per cent in July 2015. Besides, the rate of price increase in vegetables was recorded at a negative 6.36 per cent in August, while fruits were cheaper with an inflation print of 0.99 per cent.

Meanwhile, in the wholesale price index, food inflation basket remained in the negative territory for second month in a row at (-)1.13 per cent. For vegetables, it was (-)21.21 per cent, helped by potato where inflation was (-)51.71 per cent.

But for onion and pulses, wholesale prices of most of the food articles either declined or showed a very marginal increase during the month. Inflation in the fuel and power segments was (-)16.50 per cent, while that of manufactured products was (-)1.92 per cent in August. With PTI