Decline in WPI, CPI and growth in IIP together provide room for rate cut: ASSOCHAM

Welcoming the decline in Wholesale Price Index (WPI) for July 2015, the ASSOCHAM today said that drop in WPI, together with fall in the Consumer Price Index (CPI) and the rise in Index of Industrial Production (IIP) presents a strong case for the Reserve Bank of India to consider an interest rate cut to push growth ahead of the central bank's scheduled policy review meeting.

"A sustained inflation decline seems to be there with a falling trend in the wholesale prices now fairly been established and observed," said ASSOCHAM secretary general D.S. Rawat.

"Slight moderation in prices of primary articles and manufacturing coupled with sharp fall in the price of both fuel and power seemed to have contributed to the decline in WPI," he added.

Rawat, however, said that the prices of pulses, dairy and protein items within the food articles seem to be a source of concern.

"Therefore, emphasis needs to be laid upon the management of supply of these items," he added.

The ASSOCHAM is also slightly worried about the now observed continuous fall in the price of manufactured products as this could hurt the industry's pricing power thereby eroding their profitability.

"It also remains to be seen as to how monsoon develops and what shall be its future impact on food prices as an uneven rainfall in some regions of the country may hit crops and could pile pressure on food inflation in the future," said Rawat.

"As such the government needs to outline its preparedness and plan of action to deal with any contingency arising out of such an event," he added.

The ASSOCHAM secretary general further said the government should continue to facilitate a more conducive environment which in turn ensures a strong supply response.