Deflation: A worrying sign for Indian Economy
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According to The Economic Times (ET) report, the Wholesale Price Index (WPI) during the month of January was dragged down to -0.39% as against a dip of 0.11% in December owing to a decline in fuel prices. However, analysts and economists believe that this is not good sign for the
In the month of January, fuel and power inflation slumped to (-)10.69% from (-)7.8% in December 2014, as per the ET report. The inflation of primary articles surged to 3.27% as compared 2.17% which was registered in December. Inflation of food articles climbed up to 8% as against 5.20%, recorded in December 2014.
"Deflation in the world is affecting us as well. Manufacturers are losing their pricing power. We already have corroboratory evidence of surplus capacity. Lower pricing power for corporates implies that there will be less incentive to manufacture goods," Mythili Bhusnurmath, who is the consulting Editor of ET Now, told The Economic Times.
Sanjay Shah of HSBC Global Asset Management India told the ET,"If manufacturing inflation is so low, it will start reflecting in CPI and pull it down, that may take inflation numbers to levels lower than what the RBI wants."
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