India’s Consumer Price Inflation remains record low.
As expected the Consumer Price Index for the month of January 2017 touched a new low. The CPI for January 2017 was 132.4 down 0.4 points from that of December 2016. Rate of CPI inflation in January was 3.17% much less than 5.69% seen in January 2016.
According to Deepak Talwar of DTA Consulting the primary reason for the fall in CPI has been sharp fall in food prices.”
Consumer Food Price Index (CPFI) rose just be 0.56% in January 2017 compared to 6.85% rise in January 2016.
“The effect of demonetisation”, said Deepak Talwar, “resulted in fall in perishable food items. Evidently deprived of liquidity middle men could not store food products which led to click here distress sale by farmers.”
But non-food non-fuel core inflation was up. In addition crude oil prices increased due to production cut by producing nations.
Quoting analysis by DTA Consulting its principal Deepak Talwar said, “In view of the hardening core inflation and upward pressure on oil prices Reserve Bank of India decided to leave policy rates unchanged.”
Evidently the commercial banks, flush with deposits, post demonetisation, will have to cut loan rates in order to attract borrowers. “Even RBI Governor is asking banks to pass on the benefits of earlier policy rate cuts to borrowers”, said Deepak Talwar.