By MOFSL
2020-02-04T07:25:54.000Z
4 mins read
Will non-food inflation continue to spook retail inflation?
motilal-oswal:tags/commodity-account,motilal-oswal:tags/commodity-trading,motilal-oswal:tags/commodity-market,motilal-oswal:tags/commodity
2023-01-05T07:09:20.000Z

commodity

The inflation index, especially the retail inflation as represented by the CPI inflation index, lies at the heart of the RBI monetary policy. To understand CPI inflation it is essential to understand its two components; food inflation and non-food inflation. Over the last 3 meetings of the Monetary Policy Committee (MPC), the 6 members of the MPC have consistently focused on the rising threat of non-food inflation. Between 2014 and 2016, the real worry was on the food inflation front. Two successive years of drought in 2014 and 2015 had resulted in food production falling and weak distribution infrastructure only exacerbated the situation. During that period it was food inflation that actually drove the overall inflation.

Things changed drastically after a normal monsoon in the year 2016. In fact, the Kharif output was nearly 9% higher for the year 2016 and that served to keep food inflation under check. The chart below tracks how overall CPI inflation and food inflation panned out since the monsoon last year

Goods & Services Tax (GST)

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