The dilemma is not whether to cut the policy rate or not but on dealing with the divergence between retail and wholesale prices
If the numbers are to be believed, India’s inflationary woes may have subsided, for the moment at least. The Wholesale Price Index (WPI) rose by 7.2% on a year-on-year (y-o-y) basis in December. On a month-on-month basis, too, this number appears to have cooled a bit. More significantly, the non-food manufactured component of WPI rose by just 4.2% y-o-y during the same month. This is its lowest reading since June. These numbers have renewed calls for a policy rate cut by the central bank.