Food prices drag inflation to record low | Fusion - WeRIndia

Food prices drag inflation to record low

Food prices drag inflation to record low

Food prices in India witness deflation for the first time after over five years since January 2012. This was revealed in the data released by the government yesterday. Retail inflation fell 2.18 per cent in May from 2.99 per cent in the month of April. This is a record low within five and half years.

The sudden fall in vegetables and pulses and the move of the RBI to lower the interest rates led to sharp decline in the rate of inflation. Last year, the inflation rate was 5.76 per cent.

The whole food inflation was in negative territory at minus 1.05 percent during the month. The prices of vegetables and pulses dropped by 13.44 per cent and 19.45 per cent respectively in the month of May.

Not just the food, but other things like fuel, clothing, housing etc. saw lower inflation rate in that month. There was just marginal rise in the rates of fruits.

To ensure the inflation rates subdue, the key interest rate was not changed by the RBI in the beginning of this month. In addition to inflation, the industrial output also fell to 3.1 per cent in April this year.

It was 6.5 per cent last year. The government data revealed that it was perhaps the effect of demonetization.

Commodity prices have slumped but there has been a surge in the rupee. As a result, the imports became cheaper and resisted price pressures. Furthermore, a normal monsoon is predicted this summer which is a good news.

.Manufacturing, capital goods and consumer durables are the worst performing sectors in the month of April.

RBI had set a mid-term target of 4 per cent as upper limit of inflation for the past seven month. But the lowest inflation missed it.

Now, in order to energize the economic growth of the country, the Bank has to recoup interest rate cuts.

Image credit: Image by Steve Buissinne from Pixabay (Free for commercial use)

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