Wholesale prices index inflation falls to historic low, concern over deflation

Pressure mounts on RBI to reduce interest tax regime

GN Bureau | September 14, 2015


#wholesale   #inflation   #deflation   #fuel   #food   #rbi   #interest rate  

The fear has always been in the air and today’s figures add to the anxiety. Deflationary trend continued for the 10th month in a row with inflation plunging to a historic low of (-)4.95% in August on cheaper fuel and vegetables. The Wholesale Price Index-based inflation was (-)4.05% in July. It has been in the negative zone since November 2014. In August 2014, inflation was 3.85%.

This puts pressure on Reserve Bank of India but the central banker may wait before taking decision on cutting interest rates. The inflation data for June has been revised to (-)2.13%, as compared to provisional estimates of (-)2.40%. The Reserve Bank mostly tracks the Consumer Price Index-based inflation for its policy decision, and its next review is due on September 29.

The CPI or retail inflation data is expected later in the day. CPI in July recorded a low of 3.78%. As RBI wanted more clarity over inflation numbers in the months to come, it kept the key rate unchanged in its monetary policy review on August 4.

Overall, the food basket inflation remained in negative territory for second month in a row at (-)1.13%. For vegetables, it declined to (-)21.21%, helped by potato at (-)51.71%.

Inflation rate in fuel and power segment was (-)16.50%, while that in manufactured products was (-) 1.92% in August. Besides pulses and onion, the food items which became dearer in August are eggs, meat and fish (3.30 per cent), milk (2.08%) and wheat (2.05%).

The index for ‘Food Articles’ group rose by 2.6 percent to 262.3 (provisional) from 255.7 (provisional) for the previous month due to higher price of fruits & vegetables (10%), arhar (6%), gram and urad (3% each), bajra, pork and maize (2% each) and masur, ragi, wheat, barley and condiments & spices (1% each).  However, the price of poultry chicken (6%),      beef & buffalo meat (3%) and moong, tea and jowar (1% each) declined.

 The index for  ‘Non-Food Articles’ group rose by 0.8 percent to 217.4 (provisional) from 215.6 (provisional) for the previous month due to higher price of flowers (29%), copra (coconut) (8%), fodder and niger seed (7% each), safflower (kardi seed) and cotton seed   (3% each), castor seed and groundnut seed (2% each) and mesta, sunflower and rape & mustard seed (1% each).  However, the price of raw silk (12%), gaur seed (11%), raw rubber (8%), soyabean (6%), gingelly seed (sesamum) (3%) and linseed and raw cotton (2% each) declined.

The index for  ‘Minerals’ group declined by 4.4 percent to 244.6 (provisional) from 255.9 (provisional) for the previous month due to lower price of phosphorite (9%), crude petroleum (7%), sillimanite and copper ore (5% each) and iron ore (2 %).  However, the price of zinc concentrate (8%) and chromite (2%) moved up.

Inflation
The annual rate of inflation, based on monthly WPI, stood at -4.95% (provisional) for the month of August, 2015 (over August, 2014) as compared to -4.05% (provisional) for the previous month and 3.85% during the corresponding month of the previous year.  Build up inflation rate in the financial year so far was 0.34% compared to a build up rate of 3.11% in the corresponding period of the previous year.

The index for ‘Food Articles’ group rose by 2.6 percent to 262.3 (provisional) from 255.7 (provisional) for the previous month due to higher price of fruits & vegetables (10%), arhar (6%), gram and urad (3% each), bajra, pork and maize (2% each) and masur, ragi, wheat, barley and condiments & spices (1% each).  However, the price of poultry chicken (6%),      beef & buffalo meat (3%) and moong, tea and jowar (1% each) declined.

 The index for  ‘Non-Food Articles’ group rose by 0.8 percent to 217.4 (provisional) from 215.6 (provisional) for the previous month due to higher price of flowers (29%), copra (coconut) (8%), fodder and niger seed (7% each), safflower (kardi seed) and cotton seed   (3% each), castor seed and groundnut seed (2% each) and mesta, sunflower and rape & mustard seed (1% each).  However, the price of raw silk (12%), gaur seed (11%), raw rubber (8%), soyabean (6%), gingelly seed (sesamum) (3%) and linseed and raw cotton (2% each) declined.

The index for  ‘Minerals’ group declined by 4.4 percent to 244.6 (provisional) from 255.9 (provisional) for the previous month due to lower price of phosphorite (9%), crude petroleum (7%), sillimanite and copper ore (5% each) and iron ore (2 %).  However, the price of zinc concentrate (8%) and chromite (2%) moved up. 

Fuel and Power
The index for this major group declined by 4.5 percent to 178.7 (provisional) from 187.1 (provisional) for the previous month due to lower price of  furnace oil (12%), aviation turbine fuel (11%), high speed diesel (9%), petrol (3%) and bitumen (1%).

Manufactured products
The index for this major group declined by 0.4 percent to 153.1 (provisional) from 153.7 (provisional) for the previous month. The groups and items for which the index showed variations during the month are as follows:-

The index for ‘Food Products’ group declined by 0.2 percent to 171.7 (provisional) from 172.0 (provisional) for the previous month due to lower price of salt (5%), tea dust (unblended) and oil cakes (3% each), soyabean oil, gingelly oil and sugar ( 2 % each) and canned fish, palm oil and sunflower oil (1% each).  However, the price of gram powder (besan) (11%), tea leaf (blended) (7%), processed prawn (6%), mixed spices and sooji (rawa) (2% each) and gola (cattle feed) (1%) moved up.

The index for ‘Beverages, Tobacco & Tobacco Products’ group rose by 0.1 percent to 206.4 (provisional) from 206.1 (provisional) for the previous month due to higher price of dried tobacco and soft drinks & carbonated water (1% each).

The index for ‘Textiles’ group declined by 0.4 percent to 140.6 (provisional) from 141.2 (provisional) for the previous month due to lower price of woollen textiles (6%) and tyre cord fabric, cotton yarn, man made fibre and cotton fabric (1% each). However, the price of jute sacking cloth and jute sacking bag (4% each), gunny and hessian cloth (2%) and man made fabric (1%) moved up.

The index for ‘Machinery & Machine Tools’ group declined by 0.2 percent to 134.9 (provisional) from 135.2 (provisional) for the previous month due to lower price of fibre optic cable (4%), electric motors (3%), ball/roller bearing (2%) and      electronic pcb /micro circuit, hydraulic equipment, conductor, electrical wires and pvc insulated cable (1% each).  However, the price of battery dry cells (3%), heat exchanger and harvester (2% each) and insulators (1%) moved up.

The index for ‘Transport, Equipment & Parts’ group declined by 0.1 percent to 137.7 (provisional) from 137.8 (provisional) for the previous month due to lower price of bi-cycles (2%).

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