NEW DELHI: India’s wholesale inflation eased to an eight-month low in December, 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 per cent 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 per cent rise in November and below a 4.42 per cent increase forecast by economists in a Reuters poll.
The Reserve Bank of India’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 Feb. 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 slumped to 0.5 per cent from an upwardly revised 8.4 per cent in October, on a slowdown in auto and garment manufacturing. The economic weakness is a problem for Prime Minister Narendra Modi, who has already 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 per cent to 238,692 units from a year earlier, data released by the Society of Indian Automobile Manufacturers (SIAM) showed.
Wholesale food prices in December remained almost flat, up 0.07 per cent from a year earlier compared with a 1.96 per cent fall a month earlier. The figures indicate that rural incomes remain under pressure while consumers are benefitting from easing inflation.
Anger among farmers contributed to the defeat of Modi’s Bharatiya Janata Party in three key state elections late last year.
“A deflationary trend in many food items for the last few months only shows that farmers’ incomes are not rising,” said Pant.
Source: Economic Times