According to Care Ratings, the RBI may contemplate a rate cut if the WPI and CPI figures continue to move downwards over the next two months
There finally seems to be some respite in the economy with the retail inflation for the month of December 2013, as measured by the consumer price index (CPI), sliding to 9.87% from its previous level of 11.24% in November. With the CPI inflation coming in at a lower level in December, Care Ratings said it reiterates its expectation of a lower figure for wholesale price index (WPI).
"The Reserve Bank of India (RBI) may contemplate a rate cut if the wholesale price index (WPI) and CPI figures continue to move downwards in the next two months. Hence, while no change is expected in RBI stance in January, they could reconsider their options in March if such a trend persists," the ratings agency said.
Rising food prices which was the major contributor towards high inflation figures is finally reversing trend with a decline in growth from 14.72% in November to 12.16% in December. The monthly movement of the overall CPI index shows a decrease reversing the upward trend it maintained since July 2013, recording its first single digit figure after three months, the ratings agency said in a report.
Care Ratings said, food and beverage witnessed the largest drop to 12.16% in December from 14.72% in November. It has been the driving factor behind the comparatively lower CPI figure for December.
Among the food articles, the vegetables basket recorded the steepest reduction in prices ending their upward streak at 38.76% as against 61.60% in November and 45.67% in October’13. Care Ratings said, "This was expected as the new vegetable crop had started coming in the month of December. Also, decline in vegetable prices has been the sole riding factor behind the significant fall in CPI inflation in December".
"While inflation in food and beverages has moderated positively," the ratings agency said, "the figures for fuel and light and clothing, bedding and footwear remain higher. Fuel prices can be expected to rise in the near future as well with prices of LPG and diesel being progressively aligned to market rates."
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam
Fiercely independent and pro-consumer information on personal finance.
1-year online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
30-day online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
Complete access to Moneylife archives since inception ( till the date of your subscription )
