Economy

Inflation drops to 5-year low

NEW DELHI: FOOD INFLATION . PTI GRAPHICS(PTI11_14_2014_000052B)

NEW DELHI: FOOD INFLATION . PTI GRAPHICS(PTI11_14_2014_000052B)   | Photo Credit: PTI

Industry welcomes falling inflation rate with caution

Slowing for the fifth consecutive month, wholesale inflation cooled to a five-year low of 1.8 per cent in October against 2.4 per cent in September. The decline was led by softening food prices and the favourable statistical effect of a higher base last year.



Food inflation cooled to 2.7 per cent from 3.5 per cent in September, according to the official Wholesale Price Index (WPI) data released on Friday. Inflation in vegetables dropped to minus 19.6 per cent. Prices of wheat, vegetables, eggs, fish and meat fell in October, according to the official data.



Some of the food and fuel components in the Wholesale Price Index:





April

October

Cereals

8.3

3.3

Rice

12.8

6.5

Wheat

4.4

-1.9

Pulses

-1.8

4.0

Fruits

9.2

-3.5

Vegetables

1.6

-19.5

Eggs, fish and meat

10.2

-2.6

Milk

9.2

11.4

Petrol

7.8

-7.0

Diesel

13.7

8.5

WPI (All %)

6.2*

1.8

*For May







Industry chambers cheered the steep fall in the WPI inflation and made renewed calls for the Reserve Bank to slash interest rates. Economists, however, warned that the moderation in WPI inflation was in some part a statistical illusion and the trend could change post-December.



“The lowering of inflation for the fifth consecutive month is indeed a positive sign for the economy... However, these numbers should be viewed with caution…. The base effect is pronounced and will be so in November too,” Care Ratings Chief Economist Madan Sabnavis in a report on the wholesale data.



Inflation could pick up again post-December by when the favourable statistical effect of a higher base could peter off, Deloitte Economist Anis Chakravarty cautioned in a note. Inflation could also rebound if Agriculture Ministry’s forecast of a lower kharif output for cereals, pulses and oilseeds comes true, said Mr. Chakravarty.



At 11.4 per cent, inflation in prices of milk remained elevated though its pace was slightly lower than in the previous month. For rice too, inflation remained high at 6.5 per cent despite being marginally lower than September’s level of 6.9 per cent. The moderation in the rate of price rise was only marginal in cereals, slowing to 3.3 per cent from 3.5 per cent in September.



Alleviating global crude prices tempered fuel inflation from 1.3 per cent in September to 0.4 per cent in October. Petrol prices fell. Fuel inflation was minus 7 per cent.



Official data released earlier this month showed retail inflation too had slowed in October to 5.5 per cent against 6.5 per cent in the previous month on the back of moderating rate of price rise in food items and a favorable base effect.



Welcoming the easing inflation rate, Confederation of Indian Industry Director General Chandrajit Banerjee called for the Government to comprehensively address the issue of price rice to prevent it from becoming an episodic issue. He recommended Government do this through structural policy steps aimed at reducing the supply side bottlenecks, especially in the farm sector.



“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”, said Ficci Secretary General A. Didar Singh said in a statement issued here on Friday.

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Printable version | May 26, 2020 12:17:09 PM | https://www.thehindu.com/business/Economy/inflation-drops-to-5year-low/article6598615.ece

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