Decline in gross inflation: Rating agency Crisil Ltd. (CRISIL LTD) has said that the consumer price index -based gross inflation has come down to 2.8 percent in May this year. This is a good sign for economy. Crisil said in its report that the decline in food inflation is bringing down the gross inflation, but the main (core) inflation is increasing in the manufacturing sector. However, it is below the decadent trend and is now above four percent for four consecutive months. The core ie main inflation does not include items with more volatile value related to food and energy.ALSO READ: Wholesale price inflation decreased to 14 months low at 0.39 percent, vegetables became 21.62 percent cheaper
Constant increase can put pressure on gross inflation: Crisil said that the continuous increase in main inflation could put pressure on gross inflation. According to the rating agency, the growing main inflation is a sign of strengthening domestic demand in the economy. But in -depth assessment of the main inflation suggests that its recent increase is associated with global economic instability rather than domestic factors.
Crisil stated that gold prices react to global signals rather than domestic. Although the stake in the gross CPI of gold is small (1.1 percent of the total index), the inclusion of it in the main CPI inflation worsens domestic value signals. In India’s main inflation index, gold is higher than in other countries. Other major central banks also include gold in their main inflation index, but it is much lower than in India. This limits its effect on their main inflation measurement.Also Read: Share Bazaar: Sensex 281 and Nifty 97 points up due to inflation reaching the lower level
Crisil said in the report that the gold weights in India probably are probably more because it has more stake in consumption than other countries. Keeping gold out can prevent misinformation of the main CPI (Consumer Price Index) signals. (Language)
Edited by: Ravindra Gupta
