Tailwinds for the economy in the form of cooling inflation and rising industrial output are enough to excite finance minister Arun Jaitley, who has set the bar higher and is even cautious on the developments.
"We believe softening of prices is in our interest. With crude prices down, this trend of lower food prices will continue. We should not be overly optimistic now," Jaitley said on the day when inflation numbers for October came at a five-year low of 1.77%.
The finance minister also said he would rather prefer being watchful of both inflation and index of industrial production (IIP).
The food articles group, which led the fall in WPI inflation, cooled 1.3%. Fruits and vegetable prices registered maximum drop of 6%, though prices of eggs moved up 2% and mutton, chicken and pork went up 1% each.
In September, the WPI-based inflation was 2.38%. In October 2013, it was 7.25%.
"The drop in WPI inflation has been broad based as all the three major components, namely primary commodities, fuel & power and manufactured products, showed decline in October 2014. Even the Consumer Price Index-based inflation moderated to 5.5% in October 2014 from 6.3% in September 2013," said India Ratings Research – a Fitch group company.
Meanwhile, not content in plucking low-hanging fruits, Jaitely is eyeing the manufacturing sector for big growth push.
"A growth of 2.5% in IIP (index of industrial production) is not enough for me to smile. Targets are higher and it will take its time. The steps that are being taken by us will take a little time before they show some impact," Jaitley said.
After relief on inflation front, clamour for rate cut by the central bank is growing.
"The government is committed towards achieving fiscal consolidation and this along with alleviated inflation creates room for a more accommodative stance from the central bank in terms of rate reduction in the policy to be announced next month," said A Didar Singh, secretary general, Ficci.
In relief for the aviation sector, the oil PSUs reduced the ATF prices by 7.3% on account of falling crude prices, leading to a final 10% reduction in local ATF prices.
The other commodity prices down in the current month are petrol and bitumen (2%) and kerosene and high speed diesel (1%), which will reduce input costs for highway construction sector.
"Going forward, deceleration in global commodity prices as also the government's firm commitment to keep inflation under check would help rein in inflationary expectations and significantly reduce the upside risks to inflation. This provides sufficient room to the RBI to review its prolonged pause in policy rates and move towards policy easing in its forthcoming monetary policy especially as investment and consumption demand are yet to show visible signs of a pick-up," said Chandrajit Banerjee, director general, Confederation of Indian Industry.
0 Comments