Headline Inflation Expected To Ease Further

With the overall inflation declining in September, India Inc expects the food and fuel inflation to ease further in the current month as kharif output will come on board and the global commodity prices is expected to remain moderate.

“The Chamber believes CPI inflation would remain significantly lower than RBI’s near term target of 8% in January 2015. With the Government making further progress towards boosting infrastructure investment and reviving business climate, CPI inflation could in a similar vein undershoot RBI’s medium term target of 6% in January 2016,” Rana Kapoor, president of industry body ASSOCHAM.

He further added that apart from the inflation moderating last month, the core inflation, which is considered to be an indication of demand side pressures, has also been easing steadily, both at wholesale and retail levels.

“The chamber is confident that effective coordination between monetary and fiscal policy, coupled with pragmatic governance, will facilitate sustained disinflation in the economy, thereby allowing monetary accommodation to begin from early 2015,” stated Kapoor.

The wholesale inflation, also called the headline inflation, has hit a five year low of 2.38% while Consumer Price Index inflation or the retail inflation eased to 6.46%, its lowest in the last six years. If the present scenario continues, then Reserve Bank of India can be expected to slash its key policy rates, which could further push investments and create demand in the market.