Industry Bodies such as FICCI & Assocham Concerned for Growing Inflation Rate

The rise in Wholesale Price Index (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 Reserve Bank of India (RBI) in its first bi-monthly policy in April 2016. This point was made by industry bodies such as Assocham in reaction to the latest WPI index.
“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 Mr D.S. Rawat, secretary general of The Associated Chambers of Commerce and Industry of India (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 Mr Rawat.

Commenting on the inflation numbers released Mr. Harshavardhan Neotia, President, FICCI 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.”

“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 & creating jobs and the current situation calls for all measures to be deployed towards this end”, Mr Neotia added.

“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 Mr DS Rawat of Assocham.
Considering that arrival of monsoon is slated to delay, it would have an impact on inflation being represented by consumer price index (CPI) which the RBI is targeting to hold at 5 per cent by March 2017 which might affect RBI’s capacity to further reduce the interest rates.