Independent economists said the deflation points to weak demand, but cautioned against reading too much into it because it did not give a true picture of prices on the consumer front.
By ET Bureau | Updated:
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NEW DELHI: India's wholesale prices fell 3.21% in May, the most since November 2015 and the first instance of deflation since June 2016, as the country remained under the lockdown imposed to contain the spread of Covid-19.
Independent economists said the deflation points to weak demand, but cautioned against reading too much into it because it did not give a true picture of prices on the consumer front.
The government did not release headline retail inflation data, based on the Consumer Price Index, for May due to lack of data. However, retail food inflation was 9.28% last month compared with 8.76% in March, the National Statistical Office said on June 12.
"I do not see this as deflation but a divergence between retail and wholesale food inflation," said NR Bhanumurthy, a professor at National Institute of Public Finance and Policy in New Delhi. He pointed out that the wholesale markets were closed, so this was expected to happen. "WPI does not give a true picture of the economywide inflation," he said.
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Prices of food articles rose 1.13% last month compared with a 2.55% increase in April. In the fuel and power basket, deflation widened to 19.83% in May from 10.12% in the previous month. Prices of manufactured products fell 0.42%, the commerce and industry ministry said on Monday.
"Wholesale markets may not have remained open... It is a very difficult judgement on the basis of this number, but negative manufactured goods inflation tells us only one thing - weak demand," said DK Pant, chief economist at IndRa.
