Headline inflation showing signs of moderation: CII

The Confederation of Indian Industry (CII) notes that headline inflation, which has eased to an eight month low of 5.05 per cent in January 2014, has been showing signs of moderation during the last few months essentially due to a fall in food and fuel prices.

There has been an appreciable drop in prices of fruits and vegetables, potatoes, onions, cereals, among others which is contributing to a drop in inflation rates.

"To prevent food inflation from staging a comeback, CII has been emphasizing on the need for taking urgent steps to address supply side bottlenecks- by delisting perishables from APMC Act, permitting farmers to sell their produce in the open market, selling excess stock of grain in the open market, discouraging states from levying high local taxes and commissions on purchase of grain, encouraging the private sector to play a bigger role in grain trade-all of which would improve the productivity of agriculture and lead to a further decline in inflation," said Chandrajit Banerjee, Director General, CII.

The declining trajectory of inflation should spur the RBI to revisit its monetary policy stance and cut its policy rates to rejuvenate growth in the industry which has been hit by high interest costs and flagging investment.