Govt urged to boost supplies to rein in inflation

Two of India’s main trade and industry bodies have urged the government to take pro-active steps to boost supplies given that India's annual rate of inflation, based on monthly wholesale price index (WPI), stood at 0.79 per cent for May 2016 (over May 2015).

Apex industry body Assocham said that rise in WPI is in line with industry’s expectations as it got some upward movements through increase in prices of crude oil globally and policy measures introduced by the RBI in its first bi-monthly policy in April 2016.

“However, policymakers need to check and address through supply side responses the continuous rise in prices of commodities like pulses, food articles, cereals, wheat and other items of national interest that have been soaring continuously,” said D.S. Rawat, secretary general of Assocham.

“Though WPI figures may give some relief to manufacturers and producers since earlier it was hampering their pricing power, profitability and limiting their potential to increase capital expenditure,” said Rawat.

The index for manufactured products (weight 64.97 per cent) for May, 2016 rose by 0.5 per cent to 155.7 from 155.0 for the previous month. The index for textiles sub-group rose by 0.5 per cent to 140.6 from 139.9 for the previous month due to higher price of jute sacking bag (3 per cent), gunny and hessian cloth (2 per cent) and cotton yarn and cotton fabric (1 per cent each).

“The declining trend in index of industrial production (IIP) and rising WPI may have negative impact on country’s economy in the long run since it states that prices may be increased due to a cut in supply which should not be an issue as India has been leading various growth campaigns to attract investments and boost manufacturing,” said the chamber’s secretary general.

Assocham suggested that the government should adopt pro-active steps to check the supply situation in the country and help industry to maintain its growth momentum.

Ficci has also expressed concern at the rising food prices. Commenting on the inflation numbers released by the Office of the Economic Adviser, Ministry of Commerce and Industry, Ficci President Harshavardhan Neotia said, “Latest numbers report prices edging up on the back of elevated food prices. Upward pressure in prices is noted in the case of fruits and vegetables and protein rich items. This clearly calls for a more proactive management from the supply side. Several steps have been taken by the government to augment supplies and improve distribution of such items. We hope that the situation would be managed well and that inflation will remain within RBI’s indicative trajectory.”

He also expressed concern at the slow industrial growth and called for tweaking the monetary policy to boost growth.

“Industrial growth, particularly the manufacturing sector, continues to remain under pressure with limited signs of improvement in a few sectors. We need to broad base the growth impulses and this calls for support by way of an accommodative monetary policy. FICCI’S latest Business Confidence Survey indicates some improvement in capacity utilisation rates and for this to translate into higher investments there is a need to strengthen demand further. Investments in the industrial economy will be the key driver for sustaining a higher growth path and creating jobs and the current situation calls for all measures to be deployed towards this end”, Neotia added.

The WPI figure at 0.79 per cent for May 2016 compares unfavourably with the annual rate of inflation of 0.34 per cent for April 2016 and minus 2.20 per cent during May 2015. Build up inflation rate in the financial year 2016-17 so far was 2.34 per cent compared to a build up rate of 1.08 per cent in the corresponding period of the previous year.

Meanwhile, the official WPI for all commodities (Base: 2004-05 = 100) for the month of May, 2016 rose by 1.4 per cent to 179.4 from 177.0 for the previous month.

The index for primary articles (weight 20.12 per cent) rose by 2.4 per cent to 255.3 from 249.3 for the previous month. On the other hand, the index for fuel and power (weight 14.91 per cent) rose by 2.8 per cent to 180.3 from 175.4 for the previous month due to higher prices of furnace oil, high speed diesel, kerosene, aviation turbine fuel, petrol and bitumen.

Meanwhile, the all-India consumer price index (CPI) on base 2012=100 stood at 5.76 (provisional) in May, 2016 compared to 5.47 in April, 2016 and 5.01 in May, 2015, according to the Central Statistics Office, Ministry of Statistics and Programme Implementation.