NEW DELHI : India’s inflation rate based on the Wholesale Price Index inched up to (-)2.36% in May from a record low of (-)2.65% in April, but stayed in the negative territory for the seventh consecutive month, data released by the commerce and industry ministry showed.
Despite statistical effect of a high base, the inflation rate rose due to higher prices of manufactured products and primary articles. The WPI inflation rate was (-)2.65% in the previous month and 6.18% in May 2014. The non-food manufactured products inflation, which is a proxy for the core inflation, was (-)0.7% in May, compared with (-)0.4% a month ago.
Food articles inflation rose 3.80% in May compared with 5.73% in April, while on a month-on-month basis, the food articles index increased 0.5%. Within food, the vegetable index increased 3.0% on month, while prices of potato rose 0.4%. Prices of onion increased 0.8% on month in May. Prices of pulses increased 7.5% on month in May, while those of cereals fell by 0.6%.
Federation of Indian Chambers of Commerce and Industry (Ficci) said that the WPI based inflation continued to be in the negative zone for the seventh consecutive month led by a persistent decline in fuel and manufacturing segment prices.
“Inflation in case of food articles broadly also remained on a downward trajectory, though monsoon has been predicted to be below normal this year,” said Jyotsna Suri, president, Ficci.
However, the Associated Chambers of Commerce and Industry of India (Assocham) said that a long term sequential drop of inflation of manufacturing products could adversely impact their pricing power. “With inflation within manageable limits the focus must now shift to reviving basic goods and slowing down of the intermediate goods sector,” said Rana Kapoor, president of Assocham.
According to Kapoor, the farm incomes could suffer as a result of a weak monsoon thus impacting the demand for industrial and primary goods. “Government needs to keep on pushing more ground level reforms and improve implementation so as to realise the economy’s true potential,” he added.
Experts said the retail inflation is likely to be lower than the Reserve Bank’s projections and would average around 5 per cent level this fiscal, which in turn may prompt the central bank to go for another rate cut.
“The sensitivity to inflation has been on a decline and this could especially be the case if global food prices remain benign and trends in rural wages and MSP remain moderate,” Citigroup India Economist Anurag Jha said in a research note.
