Inflation outlook to stay muted for more months: ASSOCHAM

With the country set to reap a record foodgrains production and the industry not enjoying any pricing power, the inflation outlook remains quite muted at least till festival season of Durga Puja and Diwali, an ASSOCHAM analysis has suggested. The inflation, based on the Index of Wholesale Price Index (WPI) for the past six months, between January and June, 2017 clearly shows that there has been a sharp drop in the pace of price rise , not only in the headline number to below one per cent but also in several individual items of interest to the common household. Besides, the inflation for the manufactured products, more so for the manufactured food products, has seen a significant decline in the past six months. The headline WPI inflation has dropped in the past six months from 4.26 per cent in January, 2017 to 0.90 in June this year. For the manufactured products, it has decreased from 3.37 per cent to 2.27 per cent, while for the manufactured food products, the figure has dropped from 10.73 per cent to 3.09 per cent on the annualized basis. , said the ASSOCHAM note.

Going forward, there could be some disruption for one or two vegetable items such as tomatoes, having seen crop damage, but overall, the situation is going to remain quite comfortable for the consumers at least till October-November. Floods in some parts of the country, may also play a spoilsport. However, a vigil needs to be maintained for ensuring that farmers are protected from the market distortions and the procurement agencies like the Food Corporation of India and other government wings both at the Central and the State levels along with the cooperatives like NAFED are fully geared to lift the farm produce in time and at remunerative rates .

Commenting on the situation, the ASSOCHAM Secretary General Mr D S Rawat said, the concept of e-platforms for the farm produce is excellent, but the same needs to be given a big push by the state governments, disallowing those middle men who may not be happy to shift to the transparent system of mandi operations.

He said the fact the inflation for manufactured food has dropped from a double digit to just about three per cent clearly reflects easing of the raw material costs for the food processing firms thanks to abundant supply of farm produce.

The last three months have witnessed a dramatic fall in the WPI inflation from 5.11 per cent in March to less than one per cent in June. Here again, the impact of bumper foodgrains and the entire cereals production is clearly visible. With the wheat harvest and arrivals of the new crop began from April, the wheat inflation saw a sharp drop from 11.33 per cent in February, then to 6.33 per cent in March and to 0.29 per cent in June this year on an annualized basis.

Of course the biggest contributors to a sharp fall in inflation are the vegetable prices which have dropped by over 21 per cent in June, 2017 year on year. It is here, the inflation should start reviving in the next few months, the ASSOCHAM note added.

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