Retail inflation for farm, rural workers eases marginally in May

Source: The Economic Times, Jun 19, 2020

Retail inflation for farm and rural workers in May fell slightly to 8.4 per cent and 8.12 per cent, respectively in May as compared with April this year, a labour ministry statement said on Friday.

“Point to point rate of inflation based on the CPI-AL (agriculture labourers) and CPI-RL (rural labourers) decreased to 8.40 per cent and 8.12 per cent in May 2020 from 8.80 per cent and 8.52 per cent, respectively in April 2020,” the statement said.

Inflation based on food index of CPI-AL and CPI-RL is at 10.40 per cent and 10.21 per cent, respectively in May 2020.

The All-India Consumer Price Index Numbers for Agricultural Labourers and Rural Labourers (Base: 1986-87=100) for the month of May 2020 increased by 5 points and 6 points to stand at 1019 and 1025 points, respectively.

The major contribution towards the rise in general index of agricultural labourers and rural labourers came from food, with (+) 4.44 points and (+) 4.70 points, respectively, mainly due to rise in prices of rice, arhar, masur, ground nut oil, meat goat, poultry, vegetables and fruits etc.

The rise/fall in index varied from state to state.

In case of agricultural labourers, it recorded an increase of 2 to 19 points in 14 states and a decrease of 1 to 7 points in 5 states while it remained stationary for Rajasthan. Tamil Nadu with 1,208 points topped the index table whereas Himachal Pradesh with 788 points stood at the bottom.

In case of rural labourers, it recorded an increase of 1 to 18 points in 15 states and a decrease of 1 to 7 points in 5 states. Tamil Nadu with 1,194 points topped the index table whereas Himachal Pradesh with 838 points stood at the bottom.

Amongst states, the maximum increase in the consumer price index numbers for agricultural labourers and rural labourers was experienced by Karnataka (19 points and 18 points, respectively) mainly due to rise in the prices of rice, jowar, ragi, meat goat, poultry, vegetables and fruits, bidi, and barber charges etc.

On the contrary, the maximum decrease in the consumer price index numbers for agricultural labourers and rural labourers was experienced by Bihar state (- 7 points each ) mainly due to fall in the prices of maize, onion, fruits & vegetables etc.

Labour Minister Santosh Gangwar has said that it is commendable that Labour Bureau is bringing out retail inflation and other sets of data during these challenging times.

He said the inflation numbers are expected to improve with more economic activities in coming days.

Labour Bureau, a wing of the Ministry of Labour and Employment, has been compiling consumer price index (CPI) numbers for agricultural labourers and rural labourers every month on the basis of the price data collected from 600 sample villages spread over 20 states by visiting personally to the designated outlets.

In view of the containment measures taken to limit the spread of COVID-19, the personal visit of the field staff was suspended from March 19, 2020 and prices were collected through electronic means of communication.

In the month of May 2020, the price data was received from 433 villages which were collected, to the extent possible, through personal visits and telephone calls.

May wholesale inflation at -3.21%

Source: The Economic Times, Jun 16, 2020

India’s wholesale inflation shrank 3.21% in May even as the government said that due to limited information available for April, the provisional figures of May are compared with final figures of March.

The government had suspended the release of wholesale price index (WPI) data last month due to the nationwide lockdown imposed since 25 March to contain the spread of the Covid-19 pandemic.

“This department has advised the field offices to collect price data through electronic means of the communication during the lockdown. The response rate for April 2020 has improved substantially. Final index for the month of April 2020 will be released in next month press note in the light of the updated data received from the selected sources,” the Department of Promotion of Industry and Internal Trade (DPIIT) said in a statement on Monday.

Food inflation eased to 1.13% in May from 2.55% in April. Both fuel and manufactured price inflation turned negative last month.

“The annual rate of inflation based on WPI Food Index decreased from 5.20% in March, 2020 to 2.31% in May, 2020,” the government said.

DPIIT said that the WPI for May, 2020 have been compiled at a response rate of 75%, the final figure for March, 2020 at a response rate of 85%. These provisional figures of WPI will undergo revision as per the final revision policy of WPI. The National Statistical Office on Friday did not release the headline retail inflation data, based on consumer price index for May, similar to April, due to lack of data.

April wholesale food inflation eases to 3.6%, govt suspends headline number release on inadequate data

Source: The Economic Times, May 15, 2020

India’s wholesale food inflation declined to 3.6% in April from 5.49% a month ago, official data released on Thursday showed even as the government suspended the release of the headline wholesale inflation number due to the nationwide lockdown-led disruptions in data collection.

Inflation, as measured by the wholesale price index (WPI), was 1% in March, down from 2.26% in February.

“In view of the limited transactions of products in the wholesale market in the month of April, 2020, due to spread of Covid-19 pandemic, it has been decided to release the price movement of selected Sub-groups/Groups of WPI, following the principles of adequacy,” the commerce and industry ministry said in a statement.

On Tuesday, the National Statistical Office (NSO) suspended the release of headline retail inflation number for April for the same reason. Retail food inflation picked up in April to 10.5% from 8.76% in March.

As per the statement, the price collection of manufactured products to estimate WPI through personal visits of officials was suspended from March 19 due to the preventive measures and announcement of nationwide lockdown by the government to contain spread of Covid-19 pandemic.

“The data (ex-factory prices) was collected through electronic means of communications from selected factories and institutional sources. The Price Movement of these Sub-groups/Groups of WPI was worked out by taking the prices of only those items for which at least 25% of price quotations were reported from the selected manufacturing units,” the ministry said.

Out of the 22 NIC two-digit groups for manufactured products, indices were compiled only for five manufacturing groups- food products; beverages; chemicals and chemical products; pharmaceuticals, medicinal chemical and botanical products; and basic metals.

Wholesale fuel inflation contracted 10.1% from a 1.76% shrinkage a month ago while the price movement of primary articles shrank 0.79% in April against 3.72% inflation a month ago.

Wholesale inflation dips to 4-month low of 1% on sharp fall in food prices

Source: Business Standard, Apr 16, 2020

New Delhi: Wholesale inflation in March reduced to a four-month low of 1 per cent, down from February’s 2.3 per cent, thanks to a reduction in the rate of food inflation, according to the official data released on Thursday.

India’s wholesale inflation had crashed to 0 per cent in October and has been relatively volatile ever since. Economists said the low inflation had come amidst a low response rate, and was contrary to expectations of disinflation.

Deflationary pressure on manufactured product prices continued for the second consecutive month, and pulled down the overall Wholesale Price Index (WPI)-based inflation. In line with this, prices of manufactured products, which have a combined weight of 65 per cent in the index, rose by just 0.3 per cent, after rising by 0.4 per cent in February. These prices had fallen for four consecutive months till December.

Eleven of the 17 components within manufactured products recorded a contraction in March. Experts say the index would continue to see low growth because of the poor health of the manufacturing sector, which had seen prices softening across categories since the beginning of 2019.

In the food category, existing pressure points appeared to be softening. Overall food inflation reduced to 4.9, down from 7.7 per cent in February. Food inflation has been on a downward path since December, when it hit a high of 13.3 per cent. The reduction in the rate of food price rise is expected to benefit sections of the rural and urban poor, at a time when the country has been under a nationwide lockdown since March 25. There have been reports of low availability of foodgrain in some areas as supply chains for these goods have been disrupted. Within foods, the price of onions continued to see the highest inflation at 112 per cent. However, the rate of increase has reduced continuously from December, when it was 455 per cent. Meanwhile, the price of potatoes rose by 62 per cent.

Retail inflation eases to 5.91% in March

Source: The Economic Times, Apr 14, 2020

New Delhi: India’s retail inflation eased to 5.91% last month from 6.58% in February on a sharp fall in food inflation even as the Covid-19 outbreak is expected to weigh on inflation numbers for April as factories slow production and data collection gets hit.

Food inflation at 8.76% in March was lower from 10.81% in February, data released by the National Statistical Office (NSO) showed. While some data was missing due to the nationwide lockdown that started on March 25, the government said it was within ‘acceptable limits’.

This is the first time since November last year that retail inflation based on Consumer Price Index (CPI) has fallen below the Reserve Bank of India Monetary Policy Committee’s targeted upper band of 6%.
The inflation rate was 2.86% in March 2019. Some independent economists ET spoke with expect the central bank to announce another out-of-cycle rate cut of at least 50 basis points due to an expected plunge in economic activity.

Food inflation to trend under 4% over the next six months, says JM Financial

Source: The Economic Times, Mar 26, 2020

PUNE: The nation-wide lock-down from March 25 to April 14 is just ahead of the Rabi harvesting season.

“Our extensive interactions with various agri-supply chain players (farmers, agri-mandi dealers, etc.) indicate a limited adverse impact on Rabi crop realisations if the lock-down is lifted by mid-Apr’20, as most crops would trade subsequently and agri supply-chain functioning is ensured and enforced across states,” a research note from JM Financial.

It added: “As we saw in the months after Demonetization, small & marginal farmers usually bear the brunt of price declines, while large farmers with holding capacity can limit their losses. We expect food inflation to come in at sub-4% levels by Jun’20.

Agri-income growth in FY20 should drop to at best low single digit levels (despite our earlier conservative estimates), given the current lock-down and market disruption. A key positive however remains healthy reservoir levels (53% against the 10-year average of 35%) and a likely normal monsoon in CY20, ensuring continued agri-related investments.“

Non-agri income growth was already weak and will be further challenged in the absence of any large support/program by the government. Postponed weddings (in Apr- May’20) and deferred festival-related spending are likely to further impact discretionary consumption, while spending on staples benefits from higher stocking in the period of lock- down.

Rabi sowing is up 10% YoY, with higher sowing area across crops, barring oilseeds. “Our interactions with farmers across states indicate a robust upcoming Rabi crop with limited adverse impact from unseasonal rains (e.g. mustard in Haryana and Punjab). Harvesting in the last few days has been aided by using labour from local villages. Now, with a nation-wide lock-down, harvesting would be delayed by a few weeks.
However, the key concern in rural India is not output, but marketing for their produce. Therefore, a smooth agri-supply chain function (production, mandi, trading, transportation, etc.) across states needs to be enabled, in the absence of which, perishables (fruits & vegetables) in particular would suffer the most,” the note highlighted.

The spread of Covid-19 and fall in crude oil prices has brought down the prices of several agri-commodities by 20-30% globally in the last two months. “While we do not expect a steep decline in the prices of agri-commodities in India, some segments such as perishables (part of horticulture), milk (lack of bulk buying from businesses) and poultry/eggs (lower demand due to falsely-attributed fears) could see price declines. We do not yet expect food inflation to slip into a negative territory as it would be supported by prices of cereals, pulses and some vegetables (potato and onion) over the next few months. We expect overall food inflation to trend under 4% over the next six months, which would give the RBI a headroom for rate cuts,” the study showed.

The nation-wide lock-down and subsequent challenges in agri-marketing are likely to take a toll on rural income growth. “As highlighted earlier, non-agri income growth was already muted because of a weak real estate environment, a drop in economic activity and now a nation-wide lock-down; therefore, rural wages could suffer.

While we expect a financial package/scheme from the government for the rural population in coming days, measures such as allowing up to six months of monthly allotments from PDS to be taken upfront, could help the poor. The proposal (yet to be implemented by states) would also ensure that the high storage levels at the FCI are managed in time for the next round of wheat procurement (likely after the current lock-down is lifted),” noted JM Financial study.

January industrial output expands 2%; retail inflation in February eases

Source: The Economic Times, Mar 13, 2020

NEW DELHI: Factory output growth improved in January after a mild decline in December while retail inflation eased in February, offering the Reserve Bank of India (RBI) the option of an immediate rate cut to counter the disruption caused by the Covid-19 pandemic.

Data released by the statistics office on Thursday showed industrial output grew 2% in January against an upwardly revised 0.07% rise in December.

The simultaneously released Consumer Price Index (CPI) showed retail inflation slowing to 6.58% in February from 7.59% in January due to softer food inflation. “With domestic and global growth expected to face downside risks from the spread of Covid-19 and deflationary forces emerging, we see room for up to 50 bps of rate cut by the MPC (monetary policy committee), with any further easing contingent on the evolving growth environment,” said Upasna Bhardwaj, economist at Kotak Mahindra Bank.

The next policy review is scheduled for the first week of April.

The central bank said on Thursday it was prepared to take all necessary measures, raising the prospect of an early monetary review aimed at cutting rates, said experts.

The US Federal Reserve and other central banks have already announced measures to support national economies amid forecasts that global growth could slow to below 2% from 2.9% in 2019. OECD has lowered the global growth scenaro to 1.5% from 3% in a worst-case scenario if the spread of the virus is not contained.
The US Fed’s rate cut has increased the chances of a similar cut in India, said Indranil Pan, chief economist at IDFC First Bank. “A 35-40 basis point cut may not boost credit growth immediately but will arrest the negativity that has sunk in because of the coronavirus,” he said. A basis point is 0.01percentage point.

Food inflation fell to 10.81% from 13.63% in January and that in vegetables was 31.61% compared with 50.19% in January. Among protein-rich items, meat and fish inflation was 10.20% during the month, while that for eggs was 7.28%.

Uncertain Growth
Independent economists expect a further dip in industrial production as global trade gets hit due to the coronavirus outbreak. “There is uncertainty on the production side and automobile sales are showing that,” said Pan.

“Given that January was not the period where the Covid-19 was active in other parts of the world, the impact on supply chains will be felt more in February and March,” said Madan Sabnavis, chief economist of CARE Ratings.

Manufacturing output rose 1.5% compared with 1.3% growth in the same month a year ago while electricity generation increased 3.1% in January against 0.9% growth in the year earlier.

April-January industrial growth was 0.5% against 4.4% in the yearearlier period. December factory output swung from a 0.3% decline earlier to a 0.07% increase. Mining output grew 4.4%.

At the use-based level, the steepest contraction was in the capital goods sector at 4.3% followed by 4% in consumer durables and 0.3% in consumer non-durables. Both consumer durable and nondurables have witnessed negative growth.

Costly onion, potato push WPI inflation to 3.1% in Jan

Source: The Hindu Business Line, Feb 14, 2019

New Delhi: Wholesale Price Index (WPI)-based inflation rose to 3.1 per cent in January, against 2.76 per cent in the same month last year. The latest WPI print is also higher than the 2.59 per cent reading recorded in December 2019.

Build-up inflation rate in the financial year so far is 2.50 per cent compared to a build-up rate of 2.49 per cent in the corresponding period of the previous year, official data showed on Friday.

A surge in onion and potato prices lifted food articles inflation to 11.51 per cent for the month against 2.41 per cent in same month last year. Food articles inflation in January was, however, lower than 13.2 per cent in December 2019.

Non-food articles saw a three-fold jump to 7.8 per cent in January from 2.32 per cent in the year ago period.

Among the food articles, vegetables prices surged 52.72 per cent mainly on account of spike in price of onion, which saw 293 per cent jump, followed by potato at 37.34 per cent.

It may be recalled that earlier this week retail inflation for January came in at six-year high of 7.59 per cent, much above the RBI comfort zone and primarily due to rising vegetable and food prices.

Manufactured products inflation for January came in at 0.34 per cent against 2.79 per cent in same month last year.

The disinflation in the core WPI narrowed to 1.0 per cent in January from 1.5 per cent in the previous month.

Experts’ take

Aditi Nayar, Principal Economist, ICRA Ltd, said even with further correction anticipated in vegetable prices in February , the primary food inflation may persist in double-digits in that month.

“Higher customs duties would push up inflation related to imports to some extent going forward. However, the impact of the spread of the coronavirus on risk sentiment and commodity prices, including crude oil, is expected to exert a substantial moderation on the wholesale inflation in February,” Nayar said. Madan Sabnavis, Chief Economist, CARE Ratings, said: “WPI came at 3.1 per cent which was our forecast too. The positive increase in inflation for manufactured goods is a good sign for industry which has been confronted with negative inflation so far which means loss of pricing power. The moderation in primary inflation is not really very significant as both components — food and non-food are still high. Fuel inflation, however, should come down in the next two months.”

Economists eye silver lining in India’s rising rural inflation numbers

Source: The Economic Times, Feb 13, 2019

MUMBAI: India’s rural inflation rate surged faster than urban inflation for the first time in 19 months in January, and economists are optimistic that signals something the country desperately needs – a revival in demand in the rural economy.

Around two-thirds of India’s population depends on the rural sector with agriculture accounting for near 15% of India’s $2.8 trillion economy, and rising inflation suggests pricing power is returning to the hands of the farmers, say economists.

“This augurs well for farmers’ cash flows in the coming months. I expect early signs of demand revival to emerge from the rural belts, going ahead,” said Rupa Rege Nitsure, chief economist at L&T Financial Holdings. Read the rest of this entry »

January retail inflation at 56-month high of 7.59%

Source: Business Standard, Feb 13, 2019

New Delhi: A slim revival in industrial production in November had prompted Finance Minister Nirmala Sitharaman to see green shoots of recovery. But this has turned out to be a temporary blip — factory output has again contracted by 0.3 per cent in December.

The retail inflation rate, however, rose to a 68-month high of 7.59 per cent in January, even as the rate of price rise in food items declined. However, the food inflation rate remained elevated at 13.63 per cent. The consumer price index (CPI)-based inflation rate stood at 7.35 per cent; food inflation was at 14.19 per cent in December.

The index of industrial production (IIP) fell from a growth rate of 1.8 per cent, as the manufacturing sector slipped into negative territory again. Electricity generation continued to decline at a reduced rate in December. It shrank 0.1 per cent in December from 5 per cent in November. Manufacturing declined 1.2 per cent in December from a growth rate of 2.7 per cent in the previous month.

It was only mining which redeemed IIP numbers, rising by 5.4 per cent, against 1.7 per cent in November.

Before November, IIP had contracted three months on the trot.

Capital goods continued to decline at an accelerated rate in December. Production of these items fell 18 per cent in the month, from a contraction of 8.6 per cent in the previous month. This will impact industrial production in the coming months.

Madan Sabnavis, chief economist at CARE Ratings, said this is a reflection of low investment activity due to low capacity utilisation (70 per cent in the second quarter of 2019-20, according to the Reserve Bank of India, or RBI) and banks’ reluctance to lend.

Consumer goods — both fast-moving and durables — contracted. Sabnavis said this reflects low demand due to stagnant incomes and torpid job creation, further activated by high food inflation.

On Tuesday, Sitharaman had said ‘green shoots’ were visible in some sectors, including industrial production.

Sunil Kumar Sinha, principal economist at India Ratings and Research, said the turnaround in industrial production is still not visible and the wait for green shoots is getting longer.

The inflation rate in vegetables came down from 60 per cent in December, but it still stood at 50 per cent in January.

Pulses saw the inflation rate rising to 16.71 per cent in January, from 15.44 per cent in December. In its monetary policy statement, the RBI had pointed to rising pressure on inflation rate of pulses.

The core inflation, which is non-food and non-fuel one, rose to 4.1 per cent in January from 3.7% in December.

“Core inflation, driven by various services, is a cause for concern,” said Aditi Nayar, principal economist at ICRA. She said regardless of the level of CPI inflation, the stance of the monetary policy is likely to be retained as ‘accommodative’, for as long as the monetary policy committee (MPC) considers the output gap to be negative.

“The timing and magnitude of the next rate cut will depend on how quickly inflation appears to be reverting towards 4 per cent,” said Nayar. The MPC has pegged average CPI inflation in the fourth quarter at 6.5 per cent. For this to fructify, inflation must decline in the next two months.