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Subdued food prices ease Nov wholesale inflation to 3.15%

Lower prices of vegetables and some kitchen staples, mainly on account of demand slump post demonetisation, pulled down wholesale inflation to 3.15 per cent in November — the third straight month of decline.

Substantial decline in wholesale prices was witnessed in vegetables (-24.10 per cent), Onion (-51.51 per cent) and oil seeds (-5.05 per cent) last month.

Experts attributed the decline in vegetable prices to cash crunch following the demonetisation of Rs 500 and Rs 1000 notes on November 9 and the inability of Reserve Bank of India to pump in required currency into the system.

The Wholesale Price Index (WPI) based inflation, reflecting the annual rate of price rise, was (-)2.04 per cent in November 2015.

In October this year, it was 3.39 per cent.

Prices of pulses however continued to rule high in the wholesale market at 21.73 per cent last month, as per the Commerce Ministry data.

Potatoes recorded maximum inflationary pressure at 36.97 per cent. Inflation in fruits rose to 2.45 per cent during the month.

Overall, the food basket showed moderation with inflation at 1.54 per cent in November as against 4.34 per cent in October. Industry chamber Assocham said the fall in WPI is in tandem with the expectation which is reflective of the depressive state in the economy owing to the demonetisation.

“Boost to industry is required from both monetary and fiscal policy, i.e. lowering of interest rates by RBI and reduction in tax rates by government in the coming budget to counter the effects of overall slowdown in economy,” it said.

ICRA Principal Economist Aditi Nayar said however that rising global commodity prices and a waning of the base effect would push up WPI in December.

Story PageSubdued food items post cash-crunch soften inflation to 3.15%

The decline in wholesale inflation coincides with a fall in retail inflation, based on Consumer Price Index, which hit a two-year low of 3.63 per cent in November. ICRA further said that the decline in WPI inflation was milder than expected, with few categories displaying any impact of the note ban on wholesale prices.

“Even at the wholesale level, only perishable food items recorded a significant month-on-month decline in prices in November 2016, whereas prices of wheat and gram hardened.

Going forward, we expect most food items to track the seasonal trend of lower prices during the winter months,” Nayar said.

As per the data, inflation for manufactured articles was 3.20 per cent compared with 2.67 per cent in the previous month. The corresponding figure for sugar came in at 31.76 per cent and that of petrol 5.54 per cent.

The WPI inflation for September has been revised upwards at 3.8 per cent against the provisional estimate of 3.57 per cent. The monetary policy committee headed by RBI Governor Urjit Patel had earlier this month held interest rates steady and said demonetisation of high value currency notes could lower prices of perishables and reduce CPI inflation by 10-15 basis points by December.

Even as RBI maintained 5 per cent inflation target for March 2017, it trimmed GDP growth forecast to 7.1 per cent, from 7.6 per cent, for the current fiscal.
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