Governance & Social Justice
- Is it Unhealthy to Eat out in India?
- New National Education Policy
- SDG Gender Index 2019
- Self Help Group market linkages
- Supreme Court stops Maharashtra EWS quota
- Draft National Education Policy Controversy
- Acute Encephalitis Syndrome in muzaffarpur of bihar
- Private sector specialist in government jobs
- Abujh Maria PVTGs
- AWaRe: A WHO tool for safer use of antibiotics
- Digital Village Scheme 2.0
- Back to Village program in Jammu & Kashmir
- Child Labour in India – National Child Labour Project Scheme
- Operation Cleanup begins, Modi Government 2.0 dismisses corrupt officials
- 23rd St Petersburg International Economic Forum
- Will Financial Action Task Force put Pakistan in its Blacklist
- How powerful is the International Court of Justice?
- PM Modi in Maldives
- U.S. Now Requiring Social Media Details From All Visa Applicants
- United Nations Demands Britain To End Rule Of Chagos Islands In Six Months
- Chinese Language made Compulsory in Nepal
- Hong Kong Protests 2019
- India Invited to G-7 Summit
- PM Modi in Sri Lanka
- SCO Summit 2019
- Indian Navy Launches Operation Sankalp
- Iran shoots down US drone aircraft
- Pakistan Saved from FATF BlackList
- India warns of Commonwealth Games boycott
- Sudan political crisis
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- Guthi Bill protests in Nepal
- G 20 Summit 2019
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- CBDT tweaks Income Tax rules for Senior Citizens
- Code on Wages Bill needs to be tweaked
- Custom Reforms in India
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- How to revive demand in Indian Economy?
- India’s Foreign Trade Slowdown
- India’s solar manufacturing strategy
- IndiGo Promoters Spat Controversy
- RBI’s revised circular on NPA
- Status of Self Employment in India
- What is Demographic Distress?
- What is Priority Sector Lending Limit?
- What is Strategic Overseas Fund?
- Jal Shakti Ministry launched
- India No Longer World’s Fastest Growing Economy
- Kolhapuri Chappal get Geographical Indication Tag
- Kaleshwaram Lift Irrigation Project
- Government’s plan for Digital Payment in India
- Retail inflation at 7 month high
- What is Middle Income Trap?
- Wholesale Price Index Inflation hits 22 month low in May
- India & World Trade Organisation
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- World Bank’s Global Economic Prospects Report
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Defence & Security
Science & Technology
- Air Pollution and Human Health
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- Global Concentration of Atmospheric CO2
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- Arctic Kelps: Underwater forests in the Arctic
- India unlikely to meet carbon sink commitment
- Asiatic lion radio collaring
- Japan decides to start Commercial Whale Hunting
- Phayeng becomes first Carbon Positive village
- Fall Army Worm Attack in India
Tag: GS 3 || Economy || Banking & Financial Sector || Inflation
Why in news?
- Producers’ inflation, as indicated by the wholesale price index (WPI), slipped to 22-month low at 2.45 per cent in May 2019.
- Low demand: Lower rate of inflation for producers indicates low demand.
- If it continues for some more time, it will affect –
- capacity utilisation and
- finally profitability of the corporate sector as well as
- new investments.
- All these make a case for tax rationalisation, both for individual and corporates, so that consumption and investment demands get a push.
- Interestingly, the WPI slipped at a time when retail inflation surged to seven-month high in May as indicated by the Consumer Price Index (CPI) at 3.05 per cent (2.99 per cent in April). This is the highest after October, 2018.
- Major driver in CPI: Food inflation was the major driver of retail inflation in May 2019.
- Food is affecting the WPI too.
- Despite lower wholesale inflation, stress is emerging on the food articles category. Here inflation is in high single-digit.
- Besides, some cereals such as jowar, bajra, maize and pulses have witnessed double digit inflation now for the fourth consecutive month.
- This, against the backdrop of delayed and less-than-normal monsoon, could aggravate food inflation further in the coming months lest the government monitors the situation proactively, checks speculative activities and intervenes in the market to stabilise prices.
WPI major drivers
- Manufactured products: For the overall lower WPI, the key driver has been manufactured products where inflation declined to 1.28 per cent in May compared with 1.72 per cent in April.
- Fuel group inflation: Even fuel group inflation dropped to one per cent in May compared with 3.8 per cent in April due to softening of global crude oil prices.
- Core inflation: Further, core inflation at 1.2 per cent was at 29-month low in May.
- Weakening demand: This is clearly an indication of the weakening of demand impulse in the economy.
- Dwindling auto and FMCG sales growth have been pointing towards this for the past several months.
- RBI may continue to pursue a policy that would be supportive of growth.
- The RBI has cut policy rates in last three monetary policy reviews.
- Although impact of monetary policy is felt with a lag, India Ratings believes there is still a scope of one more rate cut this fiscal.
- However, besides being dependent on data it will also take into consideration fiscal policy stance of the government.
- Examine the causes driving the decline in WPI. What does declining WPI signify?