Decline in international commodity prices not fully factored in domestic prices: PHD Chamber

Decline in international commodity prices not fully factored in domestic prices: PHD Chamber

Decline in international commodity prices not fully factored in domestic prices: PHD Chamber

 

No.PR-133
November 7, 2015
New Delhi

 

Decline in international commodity prices not fully factored in domestic prices: PHD Chamber
 

The decline in international commodity prices has not been fully factored in the various key commodity prices in India. In face of declining international commodity prices, inflation as per Wholesale Price Index has decreased significantly and has been in negative trajectory since April 2014. However, despite the significant decrease in inflation on year to year basis, there is still a sustained increase in the price indices of various key commodities, said an analysis of PHD Research Bureau of PHD Chamber of Commerce and Industry’s ‘Impact of decline in global commodity prices on India’s inflation’, released here today.
 

During the period from April 2014 to September 2015, International commodity prices have experienced continuous decline, with largest decline registered in prices of Crude oil by 56%, followed by decline in Steel by 33%, Cotton by 27%, Maize by 25%, Sugar by 24%, Copper by 22% and Gold by 13%.
 

However, the impact of declining commodity prices have been subdued as the wholesale prices have declined at a slower rate of (-)16.8% in fuel & power, followed by (-)13.6% in sugar,(-)6.3% in basic metal alloys & metal product, (-)4.4% in cotton textiles and (-)0.3% in manufactured product. Steel which has declined globally by 33% has led to a decline of only 6.3% in WPI of basic metal alloys and metal products.
 

Percentage change in WPI of select commodities from April 2014 to September 2015

S.No.

Commodities

Weights

WPI on
1st April 2014

WPI on
30-Sep-15

% change

Commodities with increase in WPI

1

Vegetables

 1.74

219.4

297

35.4%

2

Food Articles

14.34

238.8

264

10.6%

3

Cement & Lime

 1.39

165.7

173.6

4.8%

4

Cereals

 3.37

230.6

233.8

1.4%

5

Edible oils

 3.04

146.3

148

1.2%

Commodities with decline in WPI

6

Fuel & Power

14.91

211

175.6

-16.8%

7

Sugar

 1.73

188.5

162.8

-13.6%

8

Basic Metals Alloys & Metal Product

10.74

165.4

154.9

-6.3%

9

Cotton Textiles

 2.61

164.1

156.9

-4.4%

10

Manufactured Product

64.97

153.8

153.3

-0.3%

Source: PHD Research Bureau, compiled from Office of Economic Advisor, Government of India
 

The pattern is same in case of WPI of cotton textiles and manufactured products as well.
 

“This clearly indicates the presence of numerous factors which are not allowing the prices to come down at par with international commodity prices’’, said Mr. Alok B Shriram, President, PHD Chamber of Commerce & Industry
 

In contrast, the WPI for certain commodities has increased during the recent times. WPI of vegetables has increased the maximum by 35.4%, followed by food articles at 10.6%, cement and lime at 4.8%, cereals at 1.4% and edible oils at 1.2%. An increase in wholesale prices of these commodities is indicative of a growing demand of consumer goods and construction activities.
 

Going ahead, if the decline in international commodity prices is factored fully in the prices of essential commodities, the scope for inflation remaining subdued is immense which indicates further room to soften the monetary policy stance of RBI in the coming times, said the PHD Research Bureau Statement.
 

Full Report attached.
 

ENDS

Koteshwar Prasad Dobhal
Consultant (PR)