The ‘Deflation' Threat

In line with a sustained cooling of prices across the board, retail and wholesale inflation in India for December 2018 were down at 2.2 per cent and 3.8 per cent, respectively.

- M.G. Arun

While retail inflation was at an 18-month low, beating the estimates of research firms, wholesale inflation in the country recorded an eight-month low.

The sharpest fall in prices has been in the food and beverages segment. While this has helped consumers, it has aggravated rural distress, with farmers continuing to get low prices for their produce. The Wholesale Price Index (WPI), or the price of a diversified representative basket of wholesale goods and services, showed that prices of primary food articles were down in the negative zone (when the inflation rate falls below 0 per cent) for six months in a row from July 2018, a phenomenon experts call ‘deflation’.

“The moderation in the wholesale prices has been aided by subdued food prices in vegetables, fruits and onions, along with fuel and power led by declining global crude oil prices,” said Care Ratings in a report. Brent crude oil prices are trading a shade below the $60 a barrel mark, compared with $80-plus in October 2018.