Inflation is likely to average 3.7 percent in the current fiscal, which is higher than the 2 percent recorded in the last fiscal, a Dun & Bradstreet research report said. “D&B expects WPI (Wholesale Price Index) inflation to edge up to 3.7 percent in financial year 2016 up from 2.0 percent in fiscal year 2015,” Dun & Bradstreet said in a note made available to media on Sunday.
Though declining crude oil prices and lower demand side pressures will help ease inflation, D&B listed factors which may push up WPI inflation. “If actual monsoon turns out to be below normal, not only agricultural growth would be impacted, the resultant increase in food prices would lead to reversal in the downward inflation trajectory,” the report said.
Declining for the third consecutive year, WPI inflation during the last fiscal witnessed a growth of 2 percent against a growth of 7.4 percent and 6 percent, respectively, in 2012-13 and 2013-14.
It has gone into the negative since November 2014 mainly on account of cheaper food and fuel products. It was at (-)2.06 percent in February, (-)0.39 percent in January, (-)0.50 percent in December and (-)0.17 percent in November.
In the monetary policy review in April, the Reserve Bank of India Governor Raghuram Rajan kept interest rates on hold at 7.50 percent saying he was waiting for banks to pass on the RBI’s previous rate cuts, and dismissed bankers’ claims that the cost of funds remained too high.
In this connection, Finance Minister Arun Jaitley had, in his landmark budget in February, extended the target deadline for controlling fiscal deficit to three percent, reasoning that insistence on a timetable to contain the deficit would harm growth prospects.
The targets for the next three years have been set at 3.9 percent for 2015-16, 3.5 percent for 2016-17, and 3.0 percent for 2017-18. Jaitley also announced the fait accompli of a monetary policy committee pact earlier with the RBI, which will reduce the governor’s power to act alone. (IANS)