India Inc reiterates rate cut demand as inflation remains -ve

With inflation remaining in the negative zone in January, India Inc has again pressed for a rate cut by the Reserve Bank, highlighting the need to revive demand and boost investments.

PTI| Last Updated: Feb 15, 2016, 19:06 PM IST

New Delhi: With inflation remaining in the negative zone in January, India Inc has again pressed for a rate cut by the Reserve Bank, highlighting the need to revive demand and boost investments.

"RBI should cut its benchmark interest rates in its next bi-monthly monetary policy since inflation as targeted by the central bank is well within the range, thereby creating a room for further rate cut to support demand in India," Assocham President Sunil Kanoria said.

Deflationary pressure persisted for 15th month in a row, with WPI inflation slipping again, reversing its four-month trend to (-)0.9 percent in January as food articles and vegetables turned cheaper.

 

"Given that external markets might take a little longer to recover, there is an urgency to revive domestic demand. We are hopeful that the forthcoming Union Budget will carry forward the reform momentum, with adequate thrust on pushing domestic investments and boosting demand," Ficci Secretary General A Didar Singh said.

"In a scenario of deflationary pressures being faced by the economy, government should not shy away from recalibrating the fiscal deficit target in order to push public investments with a view to add productive capacity to the economy," he added.

Singh said it should be ensured that the spending stimulus is directed towards fruitful capital expenditure, especially in infrastructure.

Food inflation stood at 6.02 percent in January as against 8.17 percent in December, showed official data released today.

Inflation in pulses and onion eased to 44.91 percent and 5.51 percent, respectively. The rate of price rise in the case of vegetables was 12.52 percent in January and for fruits, it stood at (-)2.32 percent.

Price growth in potato was (-)17.08 percent while that of egg, meat and fish came in at 5.69 percent.

The inflation print in the fuel and power segment was (-)9.21 percent and for manufactured products, it read (-)1.17 percent in January.

The central bank looks into mainly retail inflation data while firming up its monetary policy stance.

Last week, data showed that retail inflation has been rising for six straight months and stood at nearly one and a half-year high of 5.69 percent in January.

RBI also takes into account industrial production numbers. As per latest data, IIP contracted 1.3 percent in December as against a decline of 3.4 percent in November.