'Domestic prices not in sync with international commodity prices'

Though international commodity prices have declined and the inflation significantly decreased on a year-on-year basis, there is still sustained price increase in various commodities, said an analysis by a business chamber released on Saturday.

PHD Chamber of Commerce and Industry's "Impact of decline in global commodity prices on India's inflation" notes international commodity prices fell continuously from April 2014 to September 2015 but this did not find correspondence nationally.

Price decline was the highest for crude at 56 percent followed by steel (33 percent), cotton (27 percent), maize (25 percent), sugar (24 percent), copper (22 percent) and gold (13 percent), said the report drawing data from the office of the economic adviser to the government, but observed that wholesale prices in India have declined at a slower rate of 16.8 percent for fuel and power, 13.6 percent for sugar, 6.3 percent for basic metal alloys and metal product, 4.4 percent for cotton textiles and 0.3 percent for manufactured products.

Though steel declined by 33 percent globally, it translated to only a decline of 6.3 percent in the Wholesale Price Index (WPI) of basic metal alloys and metal products and with a similar pattern for cotton textiles and manufactured products.

"This clearly indicates the presence of numerous factors which are not allowing the prices to come down at par with international commodity prices," said chamber president Alok B. Shriram in a statement.

And in contrast, the WPI for certain commodities surged in recent times.

Vegetables recorded the maximum increase at 35.4 percent followed by food articles (10.6 percent), cement and lime (4.8 percent), cereals (1.4 percent) and edible oils (1.2 percent).

"Increase in the wholesale prices of these commodities is an indication of growing demand for consumer goods and construction activities," said the report but highlighted that if the declining international commodity prices are fully factored in the prices of essential commodities, there is room for Reserve Bank of India (RBI) to soften the monetary policy stance as inflation will remain subdued.