Falling inflation may change in December: D&B

Dipping inflation is likely to overturn as the figures for the current month may show a rising trend, says a PTI report, citing a research report by Dun & Bradstreet.

As per the study, though the WPI inflation stood at near zero during November 2014, and it is likely to reverse its trend in December this year largely due to the base effect.

“D&B expects the headline WPI inflation to increase by 1.0—1.5 per cent during December 2014,” the report said.

Though a sharp fall in WPI inflation and negative growth in Industrial production (IIP) is exerting pressure on the RBI to cut rates, the quantum of rate cut will be more important than the timing.

Commenting on the study, D&B India Senior Economist Arun Singh said: “A 50 basis point cut in repo rate a few months later will send a stronger signal to the market than a 25 basis point cut during or before the policy meet due in February 2014.”

As per official data, the WPI inflation hit a zero level in November and the IIP numbers contracted by 4.2 per cent in October, the sharpest decline in at least two years, on poor show by the manufacturing sector.

“Measures such as to allow banks to flexibly structure the existing project loans to infrastructure and core industries projects and governments’ initiatives for ease of doing business would boost investment and industrial activity in the country rather than a mere cut in repo rate,” Singh said.