WPI is in line with industry expectations, says ASSOCHAM

Apex industry body ASSOCHAM on Wednesday said that rise in Wholesale Price Index (WPI) is in line with industry's expectation as it got some upward movements through expected increase in industrial output for the month of August 2016 over August 2015 but sluggish industrial performance in July 2016 as shown by recently released IIP.

Going by the sectoral composition, the rise was mainly driven by inflation of primary articles, mainly due to a sustained inflation in prices of pulses, potato and fibres due to decline in production and resultant fall in supply, while fuel inflation remains at lower level, due to fall in prices of petrol due to fall in prices of crude oil globally, said DS Rawat, secretary general of ASSOCHAM.

ASSOCHAM further states that prices of products which are of national interest has been continuously rising at industry level are pulses, potato, and fibres but recent concern is sugar which has started to rise at much higher rate which policy makers should check and address through supply side responses, though it is good to note that prices of onions have been managed well.

The Chamber states that RBI being guided by CPI, which has fallen sharply for August 2016 and reached at 5.05 per cent, may not be in a position to reduce the key interest rates since the fall in CPI is not yet sustained and it may rise above six per cent in coming months due to expected fall in money supply because of FCNR deposits maturing in September 2016, incremental effect of 7th pay commission and effect of policy announcements by central bank of US, Japan, China and EU.

Therefore, Chamber suggests that Government of India should take steps to address the structural issues of demand and supply within the industry to maintain the inflation within the target range continuously for at least six months.

India's Wholesale prices have risen continuously for the fifth month. According to figures released by Government, WPI is at 3.74 per cent for the month of August 2016 as compared to -5.06 percent during the corresponding month of the previous year.