New Delhi, June 14, 2019: Dr. Sunil Kumar Sinha, Director - Public Finance & Principal Economist, India Ratings & Research (Fitch Group) said, “Unlike retail inflation, wholesale inflation at 2.45% in May 2019 came in lower compared with April 2019 (3.07%).
The key driver of lower Fitch Group has been manufactured products where inflation declined to 1.28% in May 2019 compared with 1.72% in April 2019. Even fuel group inflation dropped to 1.0% in May 2019 compared with 3.8% in April 2019 due to softening of global crude prices. Further the core inflation at 1.2% is 29 months low in May 2019.
This is clearly an indication of the weakening of demand impulse in the economy. Dwindling auto and FMCG sales growth has been pointing towards this for past several months.
However, despite lower wholesale inflation stress is emerging in food articles category. Here inflation is in high single digit. Besides some cereals like jowar, bajra and maize, pulses have witnesses double digit inflation now for the fourth consecutive month.
This against the backdrop of delayed and less than normal monsoon could aggravate the food inflation further in the coming months lest government monitors the situation proactively, checks speculative activities and intervenes in the market to stabilise prices.
In view of the above India Ratings and Research (Fitch Group) believes RBI may continue to pursue policy that would be supportive of growth. The RBI has cut policy rates in last three monetary policy reviews. Although impact of monetary policy is felt with a lag, India Ratings believes there is still a scope of one more rate cut in FY20.
However, besides being dependent on data it will also take into consideration fiscal policy stance of the government.” Imagecredit:moneycontrol