India Inc. calls for policy easing as inflation lowers

Cheaper vegetables, along with pulses and meat, dragged down wholesale inflation for May to a five-month low of 2.17 per cent, putting pressure on the RBI to relax interest rate. The industry chamber indicated that WPI data for the coming months is expected to fall as well.

The May figures for the WPI represent the second instance that wholesale inflation is being calculated according to the new series with the updated base year of 2011-12, which was released last month.

On a year-on-year (YoY) basis, prices of food articles dipped 2.27 per cent during the month under review.

Prices of primary articles grew 2.14 percent annually in May and those of food articles went up by 2.25 percent.

ICRA said, "The recent decline in commodity prices would keep inflation in check in the immediate term".

Pulses and cereals saw a slower growth in prices.

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The base year of the current WPI, which was revised last month from 2004-05 to 2011-12, does not include indirect taxes, thus, decreasing volatility in inflation at wholesale level. While potato saw a deflation of 44.36 percent, for onion, it came in at 12.86 percent.

Prices of leather and leather related products also declined 4.40 percent, compared with a growth of 4.69 percent year ago.

While the revised WPI series will continue to comprise of three major groups namely primary articles, fuel & power and manufactured products, as was in the previous series, the weight of each these categories has been altered in the revised series.

Industry body Ficci is hopeful that the central bank will take a "relook" at its monetary policy stand in light of these new numbers.

Wholesale inflation rate, measured by WPI, is a marker for price movements in bulk buys for traders and broadly mirrors trends in shop-end prices.

Build up inflation rate in the financial year so far was -0.35 percent compared to a build up rate of 2.51 percent in the corresponding period of the previous year.