Inflation enters demonetisation phase

The Wholesale Price Inflation data indicated a declining trend for November. as per the Ministry of Commerce data, the WPI inflation came down to 3.15 % from 3.4% in the previous month. This is the five-month low and the index is registering a third month consecutive decline.

The present decline in inflation was largely led by falling food prices.

A general slowdown of inflation is expected in the context of demonetisation. Low consumption, wages and decline in general economic activities are supposed to bring interesting effects on the price front.

Commodity markets are already reporting low turnover with the decline in consumption. Market participants at the same time warns soaring essential goods prices in the coming months because of stagnant production. Some food items like rice have recorded upward momentum over the last couple of weeks.

Data about CPI -the leading price index is expect come out in the next week. Any slowdown in CPI may induce a rate cut by the RBI.

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