India's annual inflation rate based on wholesale prices continued in the negative territory in June, falling to (-)2.4 percent from (-)2.36 percent in May, official data showed on Tuesday provoking India Inc. to call in unison for a RBI rate cut.
The annual rate of inflation, as per the official wholesale price index, stood at 5.66 percent in the corresponding month of the previous year, according to data released by the commerce and industry ministry.
Reflecting the dichotomy over retail and wholesale prices in the country, data released on Monday by the Central Statistics Office (CSO) showed that rise in food and fuel prices had propped the country's consumer price index inflation to 5.40 percent in June from 5.01 percent in May.
The consumer price index data also showed that rural areas were relatively impacted more with an annual retail inflation rate of 6.07 percent, against 4.55 percent for urban areas. The food and beverage sub-index that has the highest weight rose by 5.48 percent from 4.80 percent in May.
The commerce ministry data showed that the wholesale inflation rate rose in June despite marginal increases in the all the three major sub-indices compared with May. The spikes were 1.4 percent for primary articles, 0.6 percent for fuels and 0.1 percent for manufactured products.
Among articles of consumption by the masses, the annual inflation for pulses was whopping 33.67 percent in June, followed by 18.54 percent for onions, 7.47 percent for fruits and 5.18 percent for milk. But prices fell 52.40 percent for potatoes and and 2.25 percent for eggs, meat and fish.
The data also reflected the lowering of prices in the fuels sub-index during the month in review. The rates of inflation were (-)9.7 percent for petrol, (-)11.86 percent for high-speed diesel and (-)4.73 percent for cooking gas.
Commenting on the data, Confederation of Indian Industry director general Chandrajit Banerjee said: "The near static price line and benign inflation outlook should propel the RBI to continue with its rate easing cycle in its forthcoming monetary policy to support investment and consumption demand especially as industrial production has recorded a muted performance and the consumer goods sector has moved into the negative terrain in May."
PHD Chamber of Commerce and Industry Alok B.Shriram said: "Subdued wholesale price inflation will help manufacturing sector in terms of increased price cost margins vis-a-vis decreased cost of raw materials."
Regarding pulses and onions that continued to remain costly, he said the "government needs to check the rising prices of pulses and take adequate steps in advance so that prices of pulses are in comfortable trajectory in the coming times".
"We urge the RBI to reduce the repo rate at least by 50 basis points in the forthcoming credit policy and another 100 points by end 2015," he added.
FICCI president Jyotsna Suri said: "There is a critical need to firm up industrial growth. We hope that the Reserve Bank would maintain its accommodative stance in the third bi-monthly statement for 2015-16 to be announced next month."
Welcoming the downtrend in WPI, the Associated Chambers of Commerce and Industry of India (ASSOCHAM) said that a long term sequential drop in inflation of manufacturing products does not augur well for manufacturers as it could adversely impact their pricing power.
"With prices seemingly under control, the central government and the Reserve Bank of India (RBI) should focus more on boosting the economic growth," said secretary general D.S. Rawat.
