Inflation lowest in yr, but it may not be good news

NEW DELHI: Retail inflation data released on Monday holds bad news for farmers, the government, and industry, with a disaggregated reading of the numbers showing that food inflation has turned negative and core inflation remains obstinate (and has actually increased). The first means that farmers haven’t benefited from the government’s move to raise minimum support prices; agrarian distress, largely caused by poor market linkages and falling prices of food, has become a significant political issue. The second means that the Reserve Bank of India will likely retain its hawkish stance, despite demands from industry, and also some quarters of government, that interest rates be reduced to aid the cause of growth.

The Indian economy was staring at an inflationary spike due to rising oil prices and falling rupee as recently as a month ago. These fears are not as pertinent anymore. Brent crude has fallen by almost 15% in the last one month. The rupee has reversed its falling trend vis-à-vis the dollar during this period.The Latest Consumer Price Index (CPI; India’s benchmark inflation measure) data has brought further relief on this count. Annual growth in CPI went down by 39 basis points between September 2018 and October 2018. One basis point is one hundredth of a percentage point. Inflation growth in October 2018 was 3.31%, the lowest since November 2017.