The second straight month of deceleration in inflation as measured by the wholesale price index also gives a breather to the Reserve Bank, which has been trying to tame rising prices.
WPI inflation was at 6.16 per cent in December compared with 7.52 per cent in November.
January's inflation rate is the slowest since May 2013, when wholesale prices increased 4.58 per cent.
Inflation in food articles in January came down to 8.8 per cent as against 13.68 per cent in the preceding month, according to data released on Friday.
‘Food inflation remains elevated in spite of the overall favourable monsoon and agricultural production scenario, highlighting the demand-supply gaps and issues related to the supply chain,’ ICRA Senior Economist Aditi Nayar said.
As per the WPI data, prices of vegetables rose 16.6 per cent in January compared with a 57.33 per cent increase in December.
Onion prices declined to 6.59 per cent compared with a 39.56 per cent increase in December. Potato prices climbed to 21.73 per cent in January.
Fruits were cheaper, as were protein-rich items such as eggs, meat and fish. However, inflation in milk inched up slightly to 7.22 per cent in January. Data released this week showed retail inflation declined 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.
‘We must and very urgently concentrate on reviving growth for the manufacturing sector and lay special emphasis on resolving problems of the MSME sector also,’ Ficci President Sidharth Birla said.
According to the WPI data, inflation in primary articles and in the fuel and power segment was at 6.84 per cent and 10.03 per cent, respectively. Inflation in manufactured products such as sugar and edible oils was up marginally at 2.76 per cent on a monthly basis. The Reserve Bank had increased a key interest rate by 0.25 per cent to 8 per cent in its Third Quarter Review of Monetary Policy on 28 January. The central bank factors both retail and wholesale price based inflation data in its
monetary policy.
‘In the absence of an upside surprise in the inflation trajectory or in inflation expectations, it is likely to hold policy rates steady in the coming months,’ Barclays said in a research note.
There have been demands from various quarters that the RBI should look at relaxing interest rates as inflation has showed signs of easing while the slowdown in industrial output has persisted.
A Finance Ministry document said high inflation poses a big threat to growth as it would impair the ability of the Reserve Bank to cut interest rates to boost economic activities.
‘The outlook on growth is...threatened by certain downside risks, the biggest of them being the high rate of inflation, which further dents the ability of the RBI to extend monetary policy support to growth
revival,’ it said.
Economic growth fell to a decade-low of 4.5 per cent in 2012-13 fiscal and is estimated at 4.9 per cent in current financial year.
Assocham said an easy interest rate policy would not only create additional demand at the consumer level, it would also substantially lower the cost of borrowing for industry.
‘We expect this trend to continue in the coming months, giving more elbow room to the RBI for an accommodative interest rate policy,’ Assocham President Rana Kapoor said.
Sensex rises 173 points as lower inflation numbers spark interest rate cut hopes
Mumbai: Ahead of the vote-on-account session, the benchmark Sensex spurted 173 points on Friday led by fag-end buying in bluechips as wholesale inflation sliding to a eight-month low triggered hopes of some easing in interest rates.
After losing 255 points in the previous session, the Sensex rebounded from four-month lows and ended 173.47 points, or 0.86 per cent, higher at 20,366.82. The surge was led by stocks of IT, telecom, banking and refinery sectors. Friday’s gain is the best since the 256.61-point jump on 15 January.
In the 30-share index, 21 stocks gained led by the three most influential — Reliance Industries, ITC and Infosys. RIL shot up by 1.74 per cent, ITC by 0.96 per cent and Infosys by 1.65 per cent. Tata Motors (3.25 per cent) and GAIL (2.56 per cent) were the biggest gainers.
On similar lines, the 50-share NSE index Nifty jumped 47.25 points, or 0.79 per cent, to close at 6,048.35.
‘WPI for January eased to seven-month low level at 5.05 per cent. IIP showed contraction in December. This has triggered hopes of some easing in interest rates in next monetary policy. Rate sensitives, after initial weakness, recovered strongly from day’s low,’ said Rakesh Goyal, Senior Vice President, Bonanza Portfolio. Wednesday data had revealed that retail inflation fell to 24-month low at 8.79 per cent in January.
WPI inflation was at 6.16 per cent in December compared with 7.52 per cent in November.
January's inflation rate is the slowest since May 2013, when wholesale prices increased 4.58 per cent.
Inflation in food articles in January came down to 8.8 per cent as against 13.68 per cent in the preceding month, according to data released on Friday.
‘Food inflation remains elevated in spite of the overall favourable monsoon and agricultural production scenario, highlighting the demand-supply gaps and issues related to the supply chain,’ ICRA Senior Economist Aditi Nayar said.
As per the WPI data, prices of vegetables rose 16.6 per cent in January compared with a 57.33 per cent increase in December.
Onion prices declined to 6.59 per cent compared with a 39.56 per cent increase in December. Potato prices climbed to 21.73 per cent in January.
Fruits were cheaper, as were protein-rich items such as eggs, meat and fish. However, inflation in milk inched up slightly to 7.22 per cent in January. Data released this week showed retail inflation declined 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.
‘We must and very urgently concentrate on reviving growth for the manufacturing sector and lay special emphasis on resolving problems of the MSME sector also,’ Ficci President Sidharth Birla said.
According to the WPI data, inflation in primary articles and in the fuel and power segment was at 6.84 per cent and 10.03 per cent, respectively. Inflation in manufactured products such as sugar and edible oils was up marginally at 2.76 per cent on a monthly basis. The Reserve Bank had increased a key interest rate by 0.25 per cent to 8 per cent in its Third Quarter Review of Monetary Policy on 28 January. The central bank factors both retail and wholesale price based inflation data in its
monetary policy.
‘In the absence of an upside surprise in the inflation trajectory or in inflation expectations, it is likely to hold policy rates steady in the coming months,’ Barclays said in a research note.
There have been demands from various quarters that the RBI should look at relaxing interest rates as inflation has showed signs of easing while the slowdown in industrial output has persisted.
A Finance Ministry document said high inflation poses a big threat to growth as it would impair the ability of the Reserve Bank to cut interest rates to boost economic activities.
‘The outlook on growth is...threatened by certain downside risks, the biggest of them being the high rate of inflation, which further dents the ability of the RBI to extend monetary policy support to growth
revival,’ it said.
Economic growth fell to a decade-low of 4.5 per cent in 2012-13 fiscal and is estimated at 4.9 per cent in current financial year.
Assocham said an easy interest rate policy would not only create additional demand at the consumer level, it would also substantially lower the cost of borrowing for industry.
‘We expect this trend to continue in the coming months, giving more elbow room to the RBI for an accommodative interest rate policy,’ Assocham President Rana Kapoor said.
Sensex rises 173 points as lower inflation numbers spark interest rate cut hopes
Mumbai: Ahead of the vote-on-account session, the benchmark Sensex spurted 173 points on Friday led by fag-end buying in bluechips as wholesale inflation sliding to a eight-month low triggered hopes of some easing in interest rates.
After losing 255 points in the previous session, the Sensex rebounded from four-month lows and ended 173.47 points, or 0.86 per cent, higher at 20,366.82. The surge was led by stocks of IT, telecom, banking and refinery sectors. Friday’s gain is the best since the 256.61-point jump on 15 January.
In the 30-share index, 21 stocks gained led by the three most influential — Reliance Industries, ITC and Infosys. RIL shot up by 1.74 per cent, ITC by 0.96 per cent and Infosys by 1.65 per cent. Tata Motors (3.25 per cent) and GAIL (2.56 per cent) were the biggest gainers.
On similar lines, the 50-share NSE index Nifty jumped 47.25 points, or 0.79 per cent, to close at 6,048.35.
‘WPI for January eased to seven-month low level at 5.05 per cent. IIP showed contraction in December. This has triggered hopes of some easing in interest rates in next monetary policy. Rate sensitives, after initial weakness, recovered strongly from day’s low,’ said Rakesh Goyal, Senior Vice President, Bonanza Portfolio. Wednesday data had revealed that retail inflation fell to 24-month low at 8.79 per cent in January.