The Consumer Price Index, which measures inflation in India, dropped to a two-year low of 3.63% in November from 4.20% in October, despite a cash crunch in the country following the Centre’s demonetisation move. This is the fourth consecutive month that the CPI has declined.
Analysts attributed the fall to the currency ban, saying it has affected demand and people’s purchasing power. They said the decision to denotify Rs 500 and Rs 1,000 notes has led to a drop in the prices of farm products across the country. Experts told NDTV that consumer spending, which makes up 55% of India’s economy, was hit significantly after demonetisation because more than 90% of citizens prefer to pay by cash.
Moreover, vegetable prices plunged by nearly 10%, whereas the cost of sugar and other confectionery items rose by 22%. The overall food and beverages inflation, too, had dropped – from 3.71% in October to 2.56% in November. Clothing and footwear inflation reduced to 4.98%, while fuel inflation is 2.8%.
The drop in retail inflation comes after the Monetary Policy Committee, in a surprise move, decided to keep the Reserve Bank of India’s repo rate unchanged on December 7. The key rate, which helps control inflation in the country, was maintained at 6.25% under the liquidity assessment facility, the RBI had said.
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