While the headline WPI remains at a modest level, an eye must be kept on the shooting prices of sugar, and manufactured food prices. Even at the WPI level, the year on year sugar prices have gone up by over 29 percent and manufactured products too are growing by over double digit, said ASSOCHAM Secretary General D S Rawat.
Pulses rising by 22 percent and potato by over 60 percent too should be watched carefully so that the inflation does not come in the way of moderating interest rates, said ASSOCHAM.
ASSOCHAM states that prices of essential products which are of national interest has been continuously rising are cereals, rice, wheat, potato, fruits, milk, and egg, meat and fish which policy makers should check and address through supply side responses, though it is good to note that prices of vegetables and onions have been managed well.
ASSOCHAM states that October 2016 WPI figures may give some relief to manufacturers and producers since earlier it was hampering their pricing power and profitability and limiting their potential to increase capital expenditure.
However, Chamber warns that increase in WPI may result in increase in CPI which may affect the households and final consumers badly. Therefore, policy makers should take concrete steps to minimise the transition of price rise from WPI to CPI.
The Chamber suggests that RBI would not be in a position to address the demand and supply in India when CPI is at high level, therefore now the economy of India is in need of strong actions from Government of India to address the structural issues of demand and supply and Chamber further requesting Government of India to implement its capital expenditure judiciously to increase the demand first within the industry which will help the industry to produce more and address the situation of over capacity.