Retail inflation quickens to 5.76% in May on higher food prices

Rising for the second month in a row, retail inflation shot up to 5.76% in May due to rise in prices of food items, including vegetables.

http://www.moneycontrol.com/news/economy/retail-inflation-quickens-to-576mayhigher-food-prices_6855381.html

 

Household goods and services rose by 4.83 percent, while health accelerated to 5.1 percent. Recreation and amusement came in at 4.39 percent, while education was at 5.85 percent for May. In April, CPI came in at 5.39 percent.

 

The Reserve Bank of India and the government have set a target of 5 percent retail inflation by March 2017. Food inflation, which led to a rise in CPI, will see some reversal in coming months on back of good monsoon. While the reversal will not be immediate, some softening will be seen in the later half of monsoon season, says Aditi Nayar, Senior Economist at ICRA. Siddhartha Sanyal, Chief Economist at Barclays also expects inflation to soften in the next three months and the Reserve Bank of India to become more accommodative. However, Indranil Pan, Chief Economist at IDBI Bank disagrees that inflation will come down soon. He believes that even if food prices come down, there is no guarantee of achieving Reserve Bank of India’s inflation target of 5 percent. While Nayar expects 5.3 percent CPI inflation for the full year and a rate cut in second half of the year, Sayal sees a sub 5 percent inflation for second half of FY17. A higher inflation number, above 5 percent, is likely in January-March 2017 period, said Pan, adding that there is not much hope of reduction in inflation right now. Below is the verbatim transcript of Aditi Nayar, Indranil Pan, Vivek Rajpal, Siddhartha Sanyal and Deven Choksey’s interview with Latha Venkatesh on CNBC-TV18. Latha: What’s your take on the manner in which the numbers have come? Nayar: Certainly higher than expected. We had pencilled in around 5.6 percent and this further reinforces our expectation that CPI inflation will remain between 5.5-6 percent in the next two prints as well. There is going to be some reversal in vegetables particularly some of the other perishable items and even some of the livestock related products as the monsoon showers really take away some of the pain that’s being caused by very extreme heat and lack of moisture even for the livestock related items. I would expect that in any case as the expectation right now as the monsoon is going to be significantly above normal in the second half of the monsoon season, so certainly next couple of prints we could expect to see some of this pain continuing, but after that we should be able to see some reversal in some of the food items at least. Also by then the sowing patterns will be lot clearer.

 

 

The Wholesale Price Index focuses on the price of goods traded between corporations, rather than goods bought by consumers, which is measured by the Consumer Price Index. The purpose of the WPI is to monitor price movements that reflect supply and demand in industry, manufacturing and construction. This helps in analyzing both macroeconomic and microeconomic conditions.

 

A consumer price index (CPI) measures changes in the price level of a market basket of consumer goods and services purchased by households.

 

The Wholesale Price Index focuses on the price of goods traded between corporations,

 

Wholesale Price Index and Rates of Inflation (Base Year: 2004-05=100)

http://www.eaindustry.nic.in/cmonthly.pdf

NOW WHAT REALLY EFFECTS WHEN RAW VEGETABLES AND GOODS ARE TRADED BETWEEN CORPORATIONS. WHO CONTROLS THE PRICES OF VEGETABLES.

http://articles.economictimes.indiatimes.com/2015-11-19/news/68412342_1_potato-production-potato-crop-patit-paban-de

Potato production is likely to fall in Uttar Pradesh, West Bengal

Sutanuka Ghosal, ET Bureau Nov 19, 2015, 11.30AM IST
(Potato production is likely…)

KOLKATA: Potato production is likely to fall in Uttar Pradesh, West Bengal and Punjab in the current season due to a lack of interest among farmers to sow the crop as well as unfavourable weather conditions. Store gate prices have already firmed up for the old stock of the crop and the new season crop that will be available from January end is expected to be costlier. A glut in production last year had pushed down potato prices below the cost of production, leading to a spurt in suicides by farmers.

 

http://www.business-standard.com/article/markets/the-suicidal-potato-economy-of-west-bengal-115091600865_1.html

 

n December 2010, West Bengal had a record potato output. Starting March 2011, the market started falling. By November 2011, 32 farmers had committed suicide. In December 2011, as the new crop starting coming in, after the old crop was either sold in distress or destroyed, prices stabilised.

By November, 2013 West Bengal was again faced with a crisis. This time, the price of potato had shot up to Rs 50 per kg from Rs 5 per kg two years ago due to low production in the previous year. The state government restricted potato export from West Bengal to other states, imposed a cap on its selling price, and ordered owners to empty their cold storages.

This is the erratic potato economy of West Bengal, one of the most risky farming bets. With a contribution of 25 per cent in India’s potato output, West Bengal is the second largest producer of the vegetable after Uttar Pradesh.

Inadequate marketing channels, manipulation by middlemen and the absence of support prices make potato cultivation in the state inherently risky.

 

BASED ON DIFFERENT STATES INDIA PRODUCES GOOD STOCK OF POTATOES.

 

WHAT DECIDES WHOLE PRICE INDEX

Inadequate marketing channels, manipulation by middlemen and the absence of support prices make potato cultivation in the state inherently risky.

THIS EFFECTS THE FARMERS INCOME AND EACH YEAR  WE CAN SEE HOW THEY CHANGE THEIR SOWING PATTERNS AND THIS EFFECTS OUR ECONOMY INFLATION.

 

UNTIL AND UNLESS GOVT OF INDIA CONTROLS  (Inadequate marketing channels, manipulation by middlemen and the absence of support prices make potato cultivation in the state inherently risky.).

for example cost of making saree is 5dollars  but when it reaches market it becomes 30 dollars now snapdeal reduces the cost by selling for 9 dollars  . which means by avoiding

(Inadequate marketing channels, manipulation by middlemen  ) cost of the product becomes less .  so why cant the indian govt  work to change the prices of  wholesale price index, consumer price index  so that they can bring down the inflation. INDIAN GOVT HAS TO HELP FARMERS IN A BETTER WAY TO REDUCE INFLATION IN INDIA.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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