Economy

Limited CPI data show vegetable prices fell in May

?OUR BUREAU New Delhi | Updated on June 12, 2020

For the second successive month, the Covid-19 pandemic has affected data collection. Consequently, the Central Statistics Office (CSO) could not present a complete picture of retail inflation for the month of May.

Although this office prepared the Index of Industrial Production for the month of April, it made it clear that it is not comparable as it is based on limited data.

Retail inflation is represented by the Consumer Price Index (CPI). According to the limited data, though index for vegetables came down sharply to 150.6 in May, from 168.6 in April, for pulses it went up from 150.4 to 151.2. Fruits and cereals did not see much change.

Aditi Nayar, Principal Economist at ICRA, said while the double-digit inflation levels for pulses, meat and fish, and oils and fats in May are a cause of concern, many of the sub-groups recorded a month-on-month moderation in prices. In particular, vegetable prices corrected appreciably in May relative to the previous month, suggesting an easing of supply disruptions, amid low demand from the restaurants and hotels segment.

The ongoing supply cuts and a gradual recovery in global demand following the easing of lockdowns, have driven up the prices of crude oil, even as it remain considerably lower than the year-ago level. The sequential rise in prices has transmitted into the retail selling price of petrol and diesel by the OMCs in the current month, which will push up inflationary pressures in June.

Social distancing norms and the mismatch in labour availability in urban areas may drive up prices in some sectors. However, behavioural changes and economic uncertainty are likely to continue to curb domestic demand for non-essential goods and services even after the economy is unlocked, which would curtail the pricing power of producers. “Benefitting from the favourable base effect related to food items in H2 FY21 (2020-21), we expect the average y-o-y CPI inflation to cool to around 4 per cent in FY21 from 4.8 per cent in FY20,” she said while expecting another round or policy rate cut, at least by 25 basis points (100 basis points mean 1 percentage point).

Industrial Growth

Meanwhile, the CSO said that in view of the preventive measures and announcement of nation-wide lockdown by the Government to contain the spread of Covid-19, a majority of the industrial sector establishments were not operating from the end of March onwards. This had an impact on the items being produced by the establishments during the month of April, where a number of responding units have reported nil production. “Consequently, it is not appropriate to compare the IIP of April with earlier months and users may like to observe the changes in IIP in the following months,” it said while adding that the Quick Estimates will undergo revision in subsequent releases as per the revision policy of IIP.

 

Overall index for industrial growth was at 56.3 while for manufacturing it was 45.1. All other indices, be it for mining (78.3), capital goods (7.7), consumer durables (5.5) or for consumer non-durables (89.4), were on the expected lines. Only, electricity was better than all others with index of 126.1. This shows work-from-home and rising temperature pushed power demand.

Published on June 12, 2020

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