Finance Ministry said, the scope of policy rates cut in front of the Reserve Bank
New Delhi: A senior finance ministry official said on Saturday (September 23) that retail inflation is consistently low at such a level, in the next monetary review before the Reserve Bank, there is a good scope for policy rates cut. They said this during the efforts made by the government to speed up the slowing economy. Reserve Bank’s bimonthly monetary policy review is to be held on October 4.
The official said, “See inflation estimates, there is scope for softening monetary policy.” The official said that all government analysis has been done on the basis that in the coming medium period, the inflation will be within the four per cent area. In its review in August, the Reserve Bank had reduced the repo rate by 0.25 percent to 6 percent, citing lack of inflation risk. This deduction has taken place for the first time in 10 months and it has come down to a policy level of around 7 years.
However, retail inflation rose to a five-month high of 3.36 percent in August due to rising prices of vegetables and fruits. In July, retail inflation was 2.36 percent in July. The officer stressed that due to various reasons, the manufacturing sector has slackened. The official said that as soon as the ban on bondage and GST will start diminishing, we expect the manufacturing sector to expand. But due to the strength of the rupee, this area has also been affected. Due to the sharp increase in prices of food items and fuel prices, the inflation based on wholesale price index (WPI) of the country has almost doubled in August to 3.24%. According to the figures released by the Ministry of Commerce and Industry, wholesale inflation was 1.88 per cent in July, compared to 1.09 per cent in August 2016. According to the ministry, “The wholesale inflation in August 2017 was 3.24 per cent, compared to 1.88 per cent in July and 1.09 per cent in August 2016. Built in inflation this fiscal, the rate of inflation was 1.41 per cent, compared to the same period last year. 3.25 percent. ”
Wholesale prices rose to 1.88 percent in July, while in June it was 0.90 percent and in May it was 2.26 percent. On the basis of the segment, the price of primary articles increased by 2.66 percent, while in July it was 0.46 percent. The weight of primary articles in WPI is 22.62%. However, the price of primary articles on the basis of year-on-year basis has been low during the reporting period, it was 4.78% in August of 2016.
Food inflation increased to 5.75 percent, while in July 2017 it was 2.15 percent. Onion prices rose 88.46 per cent on annual basis, while potato prices were negative at 43.82 per cent. In August, vegetables prices rose to 44.91 per cent, while in August 2016 it was negative 7.75 per cent. Wheat became cheaper on an annual basis. Its rate is negative at 1.44 percent whereas protein-based food products have become expensive, eggs, meat and fish have become expensive. It increased to 3.93 percent.