Jan retail inflation slows to 3.17% on note ban led demand fall
India’s retail inflation rate slowed to 3.17 percent in January, from 3.41 percent in December -- the lowest reading since November, 2014, confirming fears of weak demand as households, hit by a demonetization-induced cash crunch, appear to have put off spending.
In January 2016, consumer price index (CPI) inflation grew 5.69 percent, indicating a more expansionary economy a year ago.
Low inflation levels can indicate poor demand and weak economic activity. The moderation is sharper on an annualized basis.
The latest price data released by the statistics office represents slide in shop-end sales, triggered by the unexpected ban on Rs 500 and Rs 1000 currency notes in November 2016.
The currency recall forced families to spend less, depressing the demand for some goods including perishable products since November, when the sudden currency recall exercise began.
Consumer food price inflation (CPI), a metric to gauge changes in monthly kitchen costs, also moderated to a growth of 0.53 percent as compared with 1.37 percent in December, as compared with 6.67 percent in January, 2016, reflecting how the cash-crunch has hurt demand for both perishable and processed food items.
Prices of vegetable and pulses appear to have been worst affected by restricted access to cash.
The growth in consumer price index for “vegetables, contracted to (-)15.62 percent in January from 6.39 percent during the same period last year. It was (-)14.59 percent in December.
The price data also held out pointers on demonetisation’s effect on prices of health, transport and communication, pan, tobacco and intoxicants, and education that together account for 38 per cent of India’s retail inflation basket.
At 3.17 percent, retail inflation is hurtling fast towards the government and Reserve Bank of India’s (RBI’s) the lower tolerance limit and can be a cause for worry unless steps are taken to engineer a quick turnaround in consumer spending.
Retail inflation data, measured by the consumer price index (CPI), is the broadest metric to measure cost of living in India, also serves as the RBI’s main guide for fitting trends in economy-wide price movements.
The RBI and the government have set a retail inflation target of 4 percent for the next five years with an upper tolerance level of 6 percent and lower limit of 2 percent.
“The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving consumer price index (CPI) inflation at 5 per cent by Q4 of 2016-17 and the medium-term target of 4 per cent within a band of +/- 2 per cent, while supporting growth,” the apex bank said last week.
In January 2016, consumer price index (CPI) inflation grew 5.69 percent, indicating a more expansionary economy a year ago.
Low inflation levels can indicate poor demand and weak economic activity. The moderation is sharper on an annualized basis.
The latest price data released by the statistics office represents slide in shop-end sales, triggered by the unexpected ban on Rs 500 and Rs 1000 currency notes in November 2016.
The currency recall forced families to spend less, depressing the demand for some goods including perishable products since November, when the sudden currency recall exercise began.
Consumer food price inflation (CPI), a metric to gauge changes in monthly kitchen costs, also moderated to a growth of 0.53 percent as compared with 1.37 percent in December, as compared with 6.67 percent in January, 2016, reflecting how the cash-crunch has hurt demand for both perishable and processed food items.
Prices of vegetable and pulses appear to have been worst affected by restricted access to cash.
The growth in consumer price index for “vegetables, contracted to (-)15.62 percent in January from 6.39 percent during the same period last year. It was (-)14.59 percent in December.
The price data also held out pointers on demonetisation’s effect on prices of health, transport and communication, pan, tobacco and intoxicants, and education that together account for 38 per cent of India’s retail inflation basket.
At 3.17 percent, retail inflation is hurtling fast towards the government and Reserve Bank of India’s (RBI’s) the lower tolerance limit and can be a cause for worry unless steps are taken to engineer a quick turnaround in consumer spending.
Retail inflation data, measured by the consumer price index (CPI), is the broadest metric to measure cost of living in India, also serves as the RBI’s main guide for fitting trends in economy-wide price movements.
The RBI and the government have set a retail inflation target of 4 percent for the next five years with an upper tolerance level of 6 percent and lower limit of 2 percent.
“The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving consumer price index (CPI) inflation at 5 per cent by Q4 of 2016-17 and the medium-term target of 4 per cent within a band of +/- 2 per cent, while supporting growth,” the apex bank said last week.
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