Softer wholesale inflation raises hopes of a rate cut
NEW DELHI: India’s wholesale i nflation eased t o an eightmont h l o w i n De c e mbe r , strengthening views among some economists the central bank could ease its monetary policy stance next month as the country faces a slowdown in manufacturing.
Annual wholesale price inflation edged down to 3.80% last month, as food prices hardly rose and fuel cost increases almost halved, government data showed on Monday.
The outcome was lower than a provisional 4. 64% ri s e i n November and below a 4.42% increase forecast by economists in a Reuters poll.
The Reserve Bank of India’s (RBI’S) Monetary Policy Committee, which mainly monitors retail inflation data and kept interest rates unchanged at a meeting last month, will have leeway to soften its monetary stance at its February 7 meeting, economists say.
“With wholesale and retail inflation easing, we expect the RBI to soften its monetary policy stance at its next meeting,” said Devindra Kumar Pant, chief economist, India Ratings and Research, the Indian arm of Fitch Ratings.
Retail inflation data will be released later on Monday and economists have projected prices may have eased to its lowest since June 2017.
Annual growth in India’s industrial output in November s l u mpe d t o 0 . 5 % from an upwardly revised 8.4% in October, on a slowdown in auto and garment manufacturing.
The economic weakness is a problem for Prime Minister Narendra Modi, who has been struggling to meet ambitious job creation targets, ahead of an election, which has to be held by
May.
India’s total passenger vehicle sales for December fell 0.43% to 238,692 units from a year earlier, data released by the Society of Indian Automobile Manufacturers (Siam) showed. For 2018, passenger vehicles sales rose 5.08% to 33,94,756 units from 32,30,614 units in 2017.
Wholesale f ood prices i n December remained almost flat, up 0.07% from a year earlier compared with a 1.96% fall a month earlier.
The figures indicate that rural incomes remain under pressure while consumers are benefitting from easing inflation.