Clamour for RBI rate cut gets louder after fall in inflation

New Delhi, Nov 14: With the wholesale price inflation touching a five year low of 1.77 per cent in October, clamour for a rate cut by the RBI intensified as India Inc said it was essential to stimulate demand and perk up investments.

"This provides sufficient room to the RBI to review its prolonged pause in policy rates and move towards policy easing in its forthcoming monetary policy especially as investment and consumption demand are yet to show visible signs of a pick-up," CII Director General Chandrajit Banerjee said.

The sharp drop in WPI inflation, which fell for the fifth month in a row, came at the back of retail inflation declining to a record low of 5.52 per cent in October.

"The inflationary expectations are fairly tamed and we see no immediate upside risks with regard to prices. Given that, it is important to reiterate that demand remains subdued. The consumer durables segment reported negative growth for the fourth consecutive month in September 2014. It is extremely imperative that all levers are used to pep up demand," Ficci Secretary General A Didar Singh said.

"The government is committed towards achieving fiscal consolidation and this along with alleviated inflation creates room for a more accommodative stance from the central bank in terms of rate reduction in the policy to be announced next month," he added.

The Reserve Bank which maintained status quo in interest rate since January, will come out with the monetary policy review on December 2. The RBI factors in retail inflation while formulating its monetary policy.

"Now that wholesale inflation has been tamed, the Government must see such a phenomenal development gets translated into prices paid by consumers. Besides the relevant policy concern must be to see more investments take place in capacity building activities thereby creating a better supply response," Assocham secretary General DS Rawat said.

PTI