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New Delhi, July 14 (ANI): Welcoming the downtrend in wholesale price index (WPI), apex industry body ASSOCHAM today reiterated that a long term sequential drop of inflation of manufacturing products does not augur well for the manufacturers as it could adversely impact their pricing power.

“With prices seemingly under control, the Central Government and the Reserve Bank of India (RBI) should focus more on boosting the economic growth,” said Mr D.S. Rawat, secretary general of the Associated Chambers of Commerce and Industry of India (ASSOCHAM).

“Subdued growth as indicated by the recent Index of Industrial Production (IIP) numbers for the month of May 2015 certainly warrants cutting the interest rates to boost domestic supply response,” said Mr Rawat.

“The RBI has to ensure that cost of finance to the end user becomes competitive as such the upcoming bi-monthly monetary policy must give due consideration to reviving industrial growth in the country, more so as a low interest rate regime would mean that borrowers can borrow money at a lower interest rate and that would lead to increased purchasing power of consumers and as a result the demand for the goods will increase,” he added.

“The government on the other hand needs to ensure swift policy action for creating conducive environment, which in turn ensures a strong supply response,” further said Mr Rawat.

Some signs of the moderation in the demand for manufactured items can also be inferred from the recent IIP numbers especially when looked upon from the purview of use based industries, capital goods and consumer goods sector in particular. Impact on manufacturing firms can also impact labour demand.

The annual rate of inflation stood at -2.40 percent for the month of June, 2015 over June, 2014 as compared to 5.66 percent that was seen during the corresponding month of the previous year. Build up inflation rate in the financial year so far was 1.42 percent compared to a build up rate of 1.50 percent in the corresponding period of the previous year.

Numerous categories have contributed to the WPI decline, it seems to have benefited from softening of primary articles, fuel and a drop in the prices of manufacturing goods.

The annual rates of inflation for primary articles, fuel & power and manufactured items stood at -0.76 percent, -10.03 percent and -0.77 percent in June 2015 as against the 7.01, 9.04 and 3.95 percent observed in June 2014 respectively.

However, the prices of some of the essential consumption commodities such as pulses and onions have shot up during the month as compared to the previous year. “Therefore, emphasis needs to be laid upon the management of supply of these items.” (ANI)

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