Consumer Price Index for Nov '16 reveals a decrease of 3.63%

The Dollar Business Bureau (Sourced from PTI)

The government revealed today that the consumer price index (CPI) for the month of November 2016 has seen a decrease of 3.63% compared to 4.20% seen in October. The CPI was 5.41% in the same month the previous year.

While the urban inflation rate (CPI) was 3.05%, the rural was 4.13% showing a marked decrease than that of November 2015 when the urban inflation rate was 4.71% and the rural 5.95%.

The consumer price index in November decreased due to a sharp decline in the consumer food price index (CFPI). The CFPI in the month of November was 2.11% compared to that of October when it was 3.32%. 

Inflation of food and beverages which have a weightage of nearly 46% declined sharply to 2.11% in November 2016 when compared to the same month in the previous year when the CFPI was 6.53%.

Prices of vegetables declined by 10.29% during the month, while other essential food items like pulses, egg, meat and poultry products too turned cheaper due to weak demand amid cash crunch.

The decline in CPI inflation primarily reflects a favourable base effect and to a smaller extent subdued demand after the note ban, ratings firm ICRA said.

"The dearth of cash is likely to have hindered price discovery at the mandi level. Following demonetisation, food prices are likely to have fallen more sharply at the wholesale level than at the retail level, which saw a sequential moderation of 0.7 per cent. Therefore, we expect a sharper correction in WPI inflation in November 2016 compared to CPI inflation," said Aditi Nayar Principal Economist at ICRA.

Among others price points covered, fruit prices remained stable with inflation print of 4.60% during the month, slightly up from October's 4.42%.

Cereals and products price went up by 4.86%, a tad up from 4.40% in October.

Protein-rich meat and fish had inflation print of 5.83% in November as against 6.16% in October. Egg prices witnessed 8.55% rise as against 9.42% in the previous month.

Overall, the Consumer Food Price Index was down at 2.11% compared with 3.32% in October.

The CPI-based inflation in fuel and light segment was at 2.80% in November as against 2.81% a month ago.

"We have estimated due to demonetisation there would be 40 bps decline in inflation in November and 20 bps in December. So, on an average a 30 bps (0.3 per cent) downward impact on inflation could not be ruled out," Soumya Kanti Ghosh, Chief Economic Adviser & GM, Economic Research, SBI said.

Rural retail inflation stood at 4.13% in November compared with 4.78% in October, the data revealed.

For urban sector, it was recorded at 3.05% as against 3.54% in the previous month.

Demand in the economy has been drained for over a month since government's move to scrap old Rs 500/1000 notes with only need-based purchases being done by consumers because they continue to remain mostly cash-strapped as the supply of new currency is not adequate to meet public demand.

Prime Minister Narendra Modi's surprise announcement on November 8 to scrap these high-value notes has nearly sucked out 86% of the total cash in circulation, leaving little cash in the hands of the public for disposal.

The CPI figures have been released by the government following the announcement of demonetisation on Nov 8. A severe cash crunch in the market has hindered price increase following which there has been a sharp decline in the wholesale price level than at the retail level.