While inflation as measured by the Wholesale Price Index (WPI) came in at 9.06% for May, that is unlikely to change the Reserve Bank of India’s (RBI) stance, simply because its monetary policy statement clearly said, “Inflation is expected to remain at an elevated level in the first half of the year due to the expected pass-through of increase in international petroleum product prices to domestic prices and continued pass-through of high input prices into manufactured products.” Indeed, RBI’s projected baseline scenario on a chart in the statement explicitly shows inflation remaining at 9% till September.
Also see | Assessment Of Production Capacity (PDF)
Non-food manufacturing inflation, RBI’s proxy for core inflation, had moved up to 7.2% in May compared with 6.3% in April. As the accompanying chart from RBI’s quarterly industrial outlook survey shows, a very small percentage of respondents seem to believe that production capacity is less than adequate to service demand. While that may be good news for inflationary pressures, it may also reflect a lack of urgency in increasing capacity.
Graphic by Yogesh Kumar/Mint
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