Causes and consequences of negative inflation

(D. H. Pai Panandiker is the President of RPG Foundation. The views expressed in this column are his own)

By D. H. Pai Panandiker

For the second week in succession, inflation, going by the wholesale price index (WPI), has been negative. Some prices have declined and some others increased to yield, on average, minus 1.5 per cent inflation.

It is the prices of agricultural commodities, particularly food grains, that have shot up. Prices of manufactures have been absolutely stable but of fuel and power have dropped sharply.

The increase in the prices of food articles in the past one year was 8.7 per cent,

mainly due to the higher minimum support prices assured by Government.

Prices of rice were up16 per cent and of wheat 7 per cent. Pulses kept pace with rice though fruits and vegetables took a double digit jump in prices.

The result? Consumer price index for industrial workers (CPI) was up 10% in May.