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Weak demand leads to retail inflation to hit 3-year low of 3.41%

Retail inflation eased further to nearly 3-year low of 3.41% in December, reflecting weak demand as consumers grappled with cash crunch following demonetization.

The decline in retail inflation has been mainly on account of falling prices of vegetables and pulses. This is the lowest level at least since January 2014. The Consumer Price Index (CPI)-based inflation stood at 3.63% in November 2016, as per the data released by the Ministry of Statistics and Programme Implementation. A year ago, in December 2015, retail inflation was at 5.61%.

Inflation in vegetables category slipped further in the negative territory to (-)14.59%, as against 10.29% in November.

Likewise, prices of pulses and products also slipped further in negative territory at (-)1.57 in December. However, inflation in fruits came in at 4.74%, slightly up from November’s 4.60%. Cereals and products at 5.25% too showed a rise in inflation print during the month against 4.86% in November. Protein rich meat and fish had inflation print of 4.79% in December, as against 5.83% in November. Egg prices witnessed 6.41% rise, as against 8.55% in the previous month.

Prime Minister Narendra Modi’s surprise announcement on November 8 to scrap Rs 500 and Rs 1,000 notes, nearly 86% of the total cash in circulation, resulting in lower consumer demand. Overall, the Consumer Food Price Index was down at 1.37% in December compared with 2.11% in November. The CPI-based inflation in fuel and light segment was at 3.77% in December as against 2.80% a month ago.

Rural retail inflation stood at 3.83% in December compared with 4.13% in November. For urban sector, it was recorded at 2.90% as against 3.05% in the previous month.