Inflation dips to 5-yr low

Softening prices of food items, including vegetables, pulled down the Wholesale Price Index (WPI) inflation to a five-year low of 3.74% in August, but it may not bring relief to the industry as the RBI is insisting that “there is no point in cutting interest rates“ to see prices go up again.
The August inflation, measured by WPI, declined from 5.19% in July , while the same was 6.99% in the same month last year. The August WPI inflation is the lowest since October, 2009, when it stood at 1.8%.
Inflation in the food segment saw a significant decline to 5.15% in August from 8.43% in July . Vegetable prices contracted 4.88% in August, registering the third continuous month of decline. Onion prices were down by 44.7%. Potato prices, however, were on the rise as inflation in the kitchen essential jumped to 61.61% in August from 46.41% in July . With WPI inflation coming down to a five-year low level, India Inc has raised the pitch for lowering of interest rates to boost industrial output, which slipped to a four month low of 0.5% in July .
Speaking at a function in Mumbai, RBI governor Raghuram Rajan, however, said prices across the board have to come down to enable the central bank to cut key rates.“There is no point in cutting interest rates to see inflation picking up again,“ he said. The RBI is targeting a retail inflation of 8% by January next year and 6% by January 2016. The retail inflation had eased to 7.8% in August compared to 7.96% in July .
Taking a dig at the industry for its persistent demand of a cut in lending rates even when there is a price increase, Rajan asked them to bring down prices instead.

Growth rate of exports slipped to a five-month low of 2.4% in August at nearly $27 billion, pushing up the trade deficit to $10.8 billion. Gold imports jumped significantly to just over $2 billion last month, from $739 million a year ago.Exporters body FIEO attributed the poor performance to slowdown in Europe.