Inflation needs to relax further in the coming months, industry reacts

By Songbedna Bauri:As the Inflation rate fell to six-month low of 6.87% in July last month, it is felt by India Inc that the economic growth in India will only go up if inflation witnesses further decline in the upcoming three-four months.

Inflation, as measured by the Wholesale Price Index (WPI), stood at 7.25% during June this year.

While speaking to SME News, VK Agarwal, President of Federation of Indian Micro and Small & Medium Enterprises (FISME), said, “Inflation broadly impacts the Indian share market. It has potential to drive the growth of Indian economy if it keeps on declining for 3-4 months consistently.”

Reports suggest that the Indian stock markets rebounded from the intra-day low levels with the help of relaxed July inflation numbers.

During July last year, inflation was at 9.36%. Overall, food inflation slipped to 10.06% during July as compared to 10.81% in June.

In July 2011, the price rise rate in this category stood at 8.19%. Food articles have 14.3% share in the WPI basket. In the manufactured items category, prices rose for cotton textiles, paper and paper products, cement and lime. In food articles category in July, potatoes became costly by 73%, rice by 10.12%, cereals by 8.29% and pulses by 28.26% on annual basis. Apart from this, eggs, meat, fish prices also rose by 16%. Inflation rate in milk prices was 8.01 per cent and for vegetables it was 24.11 per cent.

Meanwhile, another industry body Confederation of Indian Industry (CII) said that government needs to take some urgent initiatives to control jump in food inflation. It further said that the falling trajectory of inflation would help the Reserve Bank of India (RBI) to relook its monetary policy stance and also lower its policy rates to strengthen growth, which is reeling under the pressure of high interest costs and declining investments.