The Telegraph
Saturday , February 15 , 2014
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Pace of price rise drops to 8-month low

New Delhi, Feb. 14: The rate of wholesale price inflation eased to an eight-month low of 5.05 per cent in January as food prices cooled, bringing relief to policymakers struggling to rein in the price spike.

The lower inflation rate can come as a breather for the Reserve Bank of India (RBI), which may decide not to hike interest rates further.

In December, the WPI inflation stood at 6.16 per cent compared with 7.52 per cent in November.

Persistently high inflation had prompted the RBI to raise key policy rates last month, the third hike since September last year, even as the country’s GDP growth rate is likely to be below 5 per cent in the current fiscal.

January’s inflation rate is the slowest since May 2013, when wholesale prices increased 4.58 per cent.

Consumer inflation had also softened in January, falling to a near two-year low of 8.79 per cent. However, core WPI inflation inched up to 3 per cent last month, its highest level since April 2013, which is a cause for worry.

Core inflation excludes the volatile components of inflation; the RBI considers non-food manufacturing inflation as core inflation.

A. Prasanna, chief economist with ICICI Securities, said, “There may still be some scope for food inflation to decelerate in the near term. However, core WPI inflation increased to 3 per cent in January from 2.8 per cent in December. But is this reason for comfort or despair? To the extent the long-period average for the series is closer to 5 per cent , the underlying price pressures may still be deemed comfortable.”

Inflation in food articles in January came down to 8.8 per cent against 13.68 per cent in the preceding month as vegetable prices fell 21.4 per cent month-on-month.

Onion prices climbed 6.59 per cent in January compared with a 39.56 per cent increase in December. Potato prices climbed 21.73 per cent in January. Fruits were cheaper as also protein-rich items such as eggs, meat and fish. However, inflation in milk inched up slightly up to 7.22 per cent in January.

Data released this week showed retail inflation to decline to a two-year low of 8.79 per cent in January, while industrial output in December shrank 0.6 per cent, prompting calls by industry for an interest rate cut to boost growth. Today’s inflation figures have backed up their demand.

“The declining inflation should spur the RBI to revisit its monetary policy stance and cut rates,” CII director-general Chandrajit Banerjee said.