From inflation to deflation

Rapid slide

In August 2008, grocery prices soared and inflation ripped through the roof to breach the 12-per cent mark, sending shivers through consumers. We continue to be a worried lot even now - but for a different reason. This time around, we are nervous not over skyrocketing inflation, but its slide!

For the first time since the new wholesale price index (WPI) series started in 1995, India's annual rate of inflation turned negative, falling to minus 1.61 per cent for the week ended June 6, official data showed Thursday.

While we would otherwise have cheered falling prices, what's worrisome is that the current dis-inflationary environment is a fallout of the drop in commodity prices, rollback in production and weakening demand. Such a sudden and frenzied fall in inflation numbers brings to fore another worry, namely Deflation.

Text: BusinessLine

Images courtesy: Getty

Also see: Inflation rate hits negative zone