WPI dips to historic (-)4.95%; pressure on RBI to cut rate

NEW DELHI: Deflationary trend continued for 10th month in a row with WPI inflation plunging to a historic low of (-)4.95 per cent in August on cheaper commodities, a development that may prompt RBI to cut rates later this month.

But for onion and pulses, wholesale prices of most of the food articles either declined or showed a very marginal increase during the month.

Economic Affairs Secretary Shaktikanta Das said there has been a considerable improvement in the price situation.

"RBI will take a considered call on the issue. There is no divergence in perception. The government and RBI are working together. Taking into account the overall factors, RBI will take a considered call," he said.

The Wholesale Price Index-based inflation was (-)4.05 per cent in July. It has been in the negative zone since November 2014. In August last year, it was 3.85 per cent.

Inflation in onions and pulses was at 65.29 per cent and 36.40 per cent respectively during August, as per official data released today.

Overall, food inflation basket remained in the negative territory for second month in a row at (-)1.13 per cent. For vegetables, it was (-)21.21 per cent, helped by potato where inflation was (-)51.71 per cent.

Inflation in the fuel and power segment was (-)16.50 per cent, while that of manufactured products was (-)1.92 per cent in August.

Ficci President Jyotsna Suri said, "Under the present circumstances, it would be most appropriate for the RBI to give weight to growth considerations and announce a deeper cut in the policy rate".

The Reserve Bank's next bi-monthly monetary policy review is on September 29. While deciding on the key interest rate it mostly tracks the Consumer Price Index-based inflation, the recent data for which will be released later in the evening. CPI in July was at record low of 3.78 per cent.