Inflation Eases in the Indian Economy, Says CARE Ratings
Moneylife Digital Team 16 January 2019
Inflation has eased in the economy both at the retail and wholesale level in the month of December 2018. The retail inflation for the month eased to an 18-month low to 2.2%, lower than CARE Ratings’ expectation of 2.9%. It was lower than 2.3% in the previous month and 5.2% in December 2017.
Likewise, the wholesale inflation was at an 8-month low, at 3.8% year-on-year (y-o-y) in December 2018, lower than 4.6% (y-o-y) in the previous month; however, it was marginally higher than 3.6% in December 2017.
The decline in retail inflation can be ascribed to broad-based decline in prices across segments barring miscellaneous. Food and beverages segment continued to be in deflation while the inflation in fuel and light was at one and half year low. The moderation in the wholesale prices has been aided by subdued food prices of vegetables, fruits and onions along with fuel and power led by declining global crude oil prices.
CARE Ratings had estimated the retail inflation to be at 2.9% while the wholesale inflation was estimated at 4.8% for Decembe 2018.
Food inflation continues to be in deflation for the third consecutive month at -1.5% compared with -1.7% in the previous month and 4.9% in the comparable month of previous year.
Within food category, food prices have been dragged down by the price contraction in vegetables, sugar, pulses, eggs and fruits which continue to be in deflation.
Vegetables saw deflation for the past 6 months and further moderated by -16.1% in December 2018. The prices have contracted because of seasonal effect and high base.
Pulses continued to be in deflation for the past two years and inflation was at -7.1% than -9.2% in the previous month. In case of pulses, the base effect was very high at 29.1% in December 2017.
Sugar prices contracted for nearly a year. In December 2018 the inflation was at -9.2% compared with -9% in the previous month.
Fruits have also seen a contraction in prices and have moved into deflation for the first time in over 2 ½ year at -1.4%.
Eggs price contracted for the second consecutive month and was at -4.3%.
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