India needs to resolve supply-side issues: Industry stakeholders

Headline inflation rose to a 14-month high in November sending ripples across the various sectors and the industry stakeholders feel it is critical for the country to resolve the supply-side issues.

The headline inflation based on wholesale price rose to 7.52 percent in November, official data released Monday Showed.

"Prices of vegetables remain unduly high and it is critical for India to implement measures to resolve supply side issues in this area. Several recommendations have been provided FICCI," Naina Lal Kidwai, president, FICCI said.

The prices in the food articles segment increased by 19.9 percent in November 2013, it was 18.2 percent in October 2013 and 8.8 percent in the same month a year back.

"With the mid-quarter monetary policy review due shortly, we hope RBI (Reserve Bank of India) will take due cognizance of the fact that growth is still feeble and needs support. IIP data released last week indicated negative growth in October 2013. The demand situation has not yet improved, which is reflected in the de-growth in the consumer durables segment," she added.

Increase in WPI inflation released days before the credit policy review by the RBI is certainly a big dampener for Ind'a's macro picture, marked by rising prices, high interest rates and low growth in industry and services, D.S. Rawat, secretary general, Assocham said.

Still, the RBI should take a contrarian call this time around and hold the interest rates, if not drop them, since the data suggests that inflation has largely come about riding on a steep rise in prices of food articles, particularly fruits and vegetables, Rawat added.

The inflation for the manufactured products for November 2013 had dropped to 2.64 percent against 5.41 percent in the same month last year clearly suggesting a demand decline. Any hike in interest rates by RBI will further hit the industrial demand, while the prices of food articles will have to be tackled by supply side improvement, he said.