Govt urged to boost supplies to rein in inflation

15 Jun '16

5 min read

Two of India's main trade and industry bodies have urged the government to take pro-active steps to boost supplies given that India's annual rate of inflation, based on monthly wholesale price index (WPI), stood at 0.79 per cent for May 2016 (over May 2015).

Apex industry body Assocham said that rise in WPI is in line with industry's expectations as it got some upward movements through increase in prices of crude oil globally and policy measures introduced by the RBI in its first bi-monthly policy in April 2016.

“However, policymakers need to check and address through supply side responses the continuous rise in prices of commodities like pulses, food articles, cereals, wheat and other items of national interest that have been soaring continuously,” said D.S. Rawat, secretary general of Assocham.

“Though WPI figures may give some relief to manufacturers and producers since earlier it was hampering their pricing power, profitability and limiting their potential to increase capital expenditure,” said Rawat.

The index for manufactured products (weight 64.97 per cent) for May, 2016 rose by 0.5 per cent to 155.7 from 155.0 for the previous month. The index for textiles sub-group rose by 0.5 per cent to 140.6 from 139.9 for the previous month due to higher price of jute sacking bag (3 per cent), gunny and hessian cloth (2 per cent) and cotton yarn and cotton fabric (1 per cent each).

“The declining trend in index of industrial production (IIP) and rising WPI may have negative impact on country's economy in the long run since it states that prices may be increased due to a cut in supply which should not be an issue as India has been leading various growth campaigns to attract investments and boost manufacturing,” said the chamber's secretary general.

Assocham suggested that the government should adopt pro-active steps to check the supply situation in the country and help industry to maintain its growth momentum.

Ficci has also expressed concern at the rising food prices. Commenting on the inflation numbers released by the Office of the Economic Adviser, Ministry of Commerce and Industry, Ficci President Harshavardhan Neotia said, “Latest numbers report prices edging up on the back of elevated food prices. Upward pressure in prices is noted in the case of fruits and vegetables and protein rich items. This clearly calls for a more proactive management from the supply side. Several steps have been taken by the government to augment supplies and improve distribution of such items. We hope that the situation would be managed well and that inflation will remain within RBI's indicative trajectory.”

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