Deflationary trend continued for the 16th month in a row as WPI inflation declined by 0.91 per cent in February, prompting India Inc to press for a rate cut by RBI to boost factory output, which has been contracting since November.
Subdued prices of certain food items and petroleum products kept the WPI inflation at (-)0.91 per cent in February as against (-)2.17 per cent a year ago. It was (-)0.9 per cent in January.
This is the 16th consecutive month since November 2014 when the deflationary pressure has persisted.
Food inflation stood at 3.35 per cent in February compared with 6.02 per cent in January, showed official data, which was released today.
In view of declining inflation and negative industrial outlook, the industry stepped up its demand for an interest rate cut by Reserve Bank in its first bi-monthly monetary policy for 2016-17 on April 5.
"A further cut in the policy rate at this juncture and its transmission by the banks in the form of lower lending rates would benefit both, companies and consumers alike, and impart some momentum to the still weak investment and consumption cycle," Ficci said.
Meanwhile, Assocham too pressed for a rate cut arguing the government has fulfilled its commitment of sticking to the fiscal consolidation path by deciding to keep the deficit for 2016-17 at 3.5 per cent of GDP.
"Therefore, it gives the room to RBI to ease liquidity and reduce interest rates to dispense with deficient demand in the economy," Assocham said.
The inflation print in the fuel and power segment was (-)6.40 per cent and for manufactured products, it read (-)0.58 per cent in February.
India Ratings Principal Economist Sunil Kumar Sinha said
pick-up in wholesale inflation is mainly driven by rise in food inflation.
The rise in wholesale inflation is in line with expectations and is essentially on the back of rising food prices along with some catch up in commodity prices, Richa Gupta, Senior Economist at Deloitte, said.
"Going ahead, expect inflation to move up further from current levels but remain capped on the back of subdued global commodity prices," she added.
The Reserve Bank keeps a close vigil on retail inflation movements to arrive at its monetary policy. The next meeting is scheduled for August 9, however, rate cut signs are widely discarded as both retail and wholesale inflation have been witnessing a rising trend in the recent past.
