Have we reined in Inflation?

Source : Moneycontrol.com

Inflation for the week ended June 16 was at 4.03% as against 4.28% for the week ended June 9. The numbers have come in lower than what the market was expecting. The market estimated it at 4.13%.
The WPI, or the Wholesale Price Index was measured at 211. 8 in the week-ago period, that is, the week ended June 9. But, for the current week under review, it has come in at 211.7 points.

So, week-on-week, the prices of the primary articles and manufactured articles have fallen a bit, which explains why the Index is lower. Because of this, the YoY inflation has fallen sharply. It stood at 4.28% (for the week ended June 9) and has come down to 4.03%.

We are now close to 4%, where we had been almost 58 weeks ago. This can be seen as a major achievement on the inflation front; it is indeed, going lower.

Earlier, the Inflation for the week ended June 9 was at 4.28% vs 4.80%. The market estimate then, was at 4.43%.

Subir Gokaran, Chief Economist, Crisil, says, “Clearly over the last few weeks we have seen the Index come down or rather the rate inflation come down sharply; largely because food prices have started to return to some levels of normalcy. But manufacturing prices have been rising; the distinguishing feature of this week’s announcement is that the manufacturing Index has come down over last week. This means we are probably beginning to see the plateauing of manufacturing inflation.”

He has opined that if the aforementioned trend persists for a few weeks, we can basically conclude that the worst of the inflation spiral is over. “But this is looking at the first week, that we are seeing this pattern. So let’s wait and watch for a while,” he has cautioned.

A noteworthy aspect of the inflation numbers that have come in, is that it’s not just the base effect but it’s also coming down of prices in various sectors which is bringing down the total inflation.

Regarding this, Samiran Chakrabarty, Chief Economist, ICICI Bank, said, “We have been seeing a distinct trend in inflation going down; I don’t see that has changed too much. We have been positively surprised in the sense it has come down even further than we had expected and if you can drill it down to something - it’s something like primary articles prices have really gone down a week or two ahead of what it was last year. So that is why the base effect has got even more pronounced. Last year, these two weeks’ primary article prices had actually gone up.”