Inflation Eases in the Indian Economy, Says CARE Ratings
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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    CAG Says Govt Resorted to Off-Budget Financing for Capital Spending
    The Comptroller and Auditor General of India (CAG) has pulled the union government for increasingly resorting to off-budget financing for revenues as well as capital spending. To address these issues, the government should consider "putting in place" a policy framework for off-budget financing, the CAG said.
     
    "In terms of revenue spending, off-budget financing was used for covering deferring fertilizer arrears or bills through special banking arrangements; food subsidy bills/arrears of Food Corporation of India (FCI) through borrowings and for implementation of irrigation scheme (AIBP) through borrowings by NABARD under the long term irrigation fund (LTIF). In terms of capital expenditure, off budget financing of railway projects through borrowings of the IRFC and financing of power projects through the PFC are outside the budgetary control. Such off-budget financing are not part of calculation of the fiscal indicators despite fiscal implications," the CAG said in the Fiscal Responsibility and Budget Management (FRBM) Act Compliance Report for FY2017 tabled in Parliament (https://cag.gov.in/content/report-no20-2018-compliance-fiscal-responsibility-and-budget-management-act-2003-department).
     
    The FRBM Act was enacted by the Parliament in August 2003 to institutionalise fiscal discipline, reduce fiscal deficit, improve macro-economic management and the overall management of the public funds by moving towards a balanced budget.
     
    CAG says the off-budget financing being outside the parliamentary control has implication for fiscal indicators as it understate government's expenditure in the year by keeping them off the budget. "Such off-budget financial arrangement, defers committed liability, including subsidy arrears or bills, or create future liability and increases cost of subsidy due to interest payment," the report added.
     
    The government should also consider disclosing the details of off- budget borrowings through disclosure statements in Budget as well as in accounts, the Auditor stated in the report.
     
    In its recommendations, the CAG says, "Mid-year benchmarks for comparison with pro-rata performance against the budget estimates should be realistic and mid-course corrections should enable achievement of year-end targets, which should be disclosed transparently to Parliament."
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    Lower food prices ease India's WPI to 4.64% in November
    Lower food and fuel prices eased India's annual rate of inflation based on wholesale prices to 4.64% in November from 5.28% in October, official data showed here on Friday.
     
    However, on a year-on-year (YoY) basis, the Wholesale Price Index (WPI) data furnished by the Ministry of Commerce and Industry was higher than the rise of 4.02% reported for the corresponding period of 2017.
     
    "The annual rate of inflation, based on monthly WPI, stood at 4.64% (provisional) for the month of November, 2018 (over November, 2017) as compared to 5.28% (provisional) for the previous month and 4.02% during the corresponding month of the previous year," the ministry said in its review of "Index Numbers of Wholesale Price in India" for November.
     
    "Build up inflation rate in the financial year so far was 4.73% compared to a build up rate of 2.83% in the corresponding period of the previous year."
     
    On a sequential basis, the expenses on primary articles, which constitute 22.62%  of the WPI's total weightage eased to 0.88%, from a rise of 1.79% in October.
     
    Similarly, the prices of food articles declined. The category has a weightage of 15.26% in the WPI index. It deflated by (-) 3.31% from a rise of (-) 1.49%.
     
    In addition, the cost of fuel and power segment, which commands a 13.15% weightage, increased at a slower pace of 16.28% from a growth of 18.44%.
     
    The expenses on manufactured products registered a rise of 4.21% from 4.49% on a YoY basis, onion prices deflated by (-) 47.60%, whereas potatoes became dearer by 86.45%.
     
    In contrast, the overall vegetable prices in the month under review declined by (-) 26.98%, against a rise of 59.87% in the same month a year ago.
     
    Among the non-food items, the price of high-speed diesel rose by 20.16% on a YoY basis, petrol by 12.06% and LPG by 23.22%.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
     

     

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