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BUSINESS » INDUSTRY Published: June 16, 2015 00:27 IST | Updated: June 16, 2015 10:33 IST NEW DELHI, June 16, 2015 Wholesale price index dips in May TCA SHARAD RAGHAVAN SANJAY VIJAYAKUMAR The Hindu Food inflation increased only 0.5 per cent over what it was in April. Food inflation remained positiv, at 3.8 % compared to what it was in May 2014. Wholesale Price Index (WPI) inflation was 2.36 per cent in May, marking the seventh consecutive month in which it has been negative, compared to 2.65 per cent in April. Food inflation remained positive, at 3.8 per cent compared to what it was in May 2014. However, the consensus among analysts is that this will not induce the Reserve Bank of India to cut rates further. The continued contraction in WPI was due to broadbased factors, with the three main components of the indexprimary articles (0.77 per cent), fuel and power (10.5 per cent), and manufactured products (0.64 per cent) — all trending negative. Food inflation, which was a concern due to the India Meteorological Department’s prediction of a deficient monsoon, was lower than feared — it increased only 0.5 per cent over what it was in April. According to Rishi Shah, an economist with Deloitte, some of this could be put down to better management by the government. “Importantly, vegetable and fruit prices have been well behaved despite the untimely rains earlier in the year. This could possibly reflect better supply side management by the government,” he said. The preparedness of the government was reiterated by other analysts as well. “Though the monsoon has been predicted to be below normal this year, the Government has already outlined its preparedness and plan of action to deal with any contingency on this account. This should ensure keeping in check any pressure on inflation arising from the food segment,” said Jyotsna Suri, President, FICCI. The ongoing decline in the price of manufactured products is mostly due to external factors, according to a report by CARE Ratings. “The decline in prices of manufactured products is in part a reflection of the decline in global crude and metal prices which has lowered the cost of raw materials and inputs used in the production process,” the report said. However, the report added that this decline in price also reflects the inability of the producers to raise prices in the absence of a pickup in demand and prevailing excess capacity. Looking ahead, Kotak Securities believes that this continued contraction of WPI inflation may not induce the Reserve Bank of India to cut rates further, since the central bank will remain focussed on the Consumer Price Index.
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6/16/2015 Wholesale price index dips in May The Hindu
http://www.thehindu.com/business/Industry/wholesalepriceindexdipsinmay/article7318903.ece?css=print 1/2
BUSINESS » INDUSTRY
Published: June 16, 2015 00:27 IST | Updated: June 16, 2015 10:33 IST NEW DELHI, June 16, 2015
Wholesale price index dips in May
TCA SHARAD RAGHAVANSANJAY VIJAYAKUMAR
The HinduFood inflation increased only 0.5 per cent over what it was in April.
Food inflation remained positiv, at 3.8 % compared to what it was in May 2014.
Wholesale Price Index (WPI) inflation was 2.36 per cent in May, marking the seventh consecutive month in which it has been negative,compared to 2.65 per cent in April. Food inflation remained positive, at 3.8 per cent compared to what it was in May 2014. However, theconsensus among analysts is that this will not induce the Reserve Bank of India to cut rates further.
The continued contraction in WPI was due to broadbased factors, with the three main components of the indexprimary articles (0.77 percent), fuel and power (10.5 per cent), and manufactured products (0.64 per cent) — all trending negative.
Food inflation, which was a concern due to the India Meteorological Department’s prediction of adeficient monsoon, was lower than feared — it increased only 0.5 per cent over what it was in April.
According to Rishi Shah, an economist with Deloitte, some of this could be put down to better management by the government. “Importantly,vegetable and fruit prices have been well behaved despite the untimely rains earlier in the year. This could possibly reflect better supply sidemanagement by the government,” he said.
The preparedness of the government was reiterated by other analysts as well. “Though the monsoon has been predicted to be below normalthis year, the Government has already outlined its preparedness and plan of action to deal with any contingency on this account. This shouldensure keeping in check any pressure on inflation arising from the food segment,” said Jyotsna Suri, President, FICCI.
The ongoing decline in the price of manufactured products is mostly due to external factors, according to a report by CARE Ratings. “Thedecline in prices of manufactured products is in part a reflection of the decline in global crude and metal prices which has lowered the cost ofraw materials and inputs used in the production process,” the report said.
However, the report added that this decline in price also reflects the inability of the producers to raise prices in the absence of a pickup indemand and prevailing excess capacity.
Looking ahead, Kotak Securities believes that this continued contraction of WPI inflation may not induce the Reserve Bank of India to cutrates further, since the central bank will remain focussed on the Consumer Price Index.
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6/16/2015 Wholesale price index dips in May The Hindu
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“We expect the headline CPI inflation to reach a low of around 4.2 per cent by August 2015 aided by afavourable base effect, before picking up in the second half of FY 2016 towards around 6.0 per cent byMarch 2016. The WPI inflation trajectory will move into the positive from November onwards to registeraround 3.3 per cent by March 2016. This uncertainty, along with volatility surrounding the Fed’s ratehike, should keep the RBI cautious and stop it from easing rates further in CY 2015,” Kotak Securitiessaid in a report.
This sentiment is backed by CARE Ratings and Anand Rathi Shares and Stock Brokers Ltd. in theirrespective reports.
Last week, in a column in The Indian Express, Chief Economic Advisor to the Ministry of Finance ArvindSubramanian questioned whether monetary policy decisions based on the CPI was the best policy.
“Today, real policy rates are either 2.4 per cent, based on the CPI, 5.9 per cent, based on the average ofthe CPI and WPI, or a whopping 7.5 per cent, based on the GDP deflator. Which is the right measure ofthe monetary policy stance? The monetary policy agreement between the Ministry of Finance and theRBI, as well as the Urjit Patel report, has argued, not inappropriately, that the inflation target/objectiveshould be based on the CPI. In normal times, that would be completely unobjectionable. But are thesenormal times, when the price indicators are, frankly, pointing in dramatically different directions?” hewrote.
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