Deflation is just about there, on a wholesale price basis. It’s true though, that at a wholesale level, prices of food seem to be going up. Yet, that is seasonal – and soon, with crop harvests going through, we’re likely to see that ease off as well.
We’ve not had deflation for a VERY long time – since before Independence. Watching the RBI tackle it will be intereesting, with bond yields staying about 6.5% (they closed at 6.62% today, a 20 bps drop from Friday).
Deflation takes an enormous amount of time to even out. People raise prices immediately. But the other way around takes time. Can you imagine going to your boss and saying ok, we have deflation, so I’ll take a pay cut? The answer applies to everyone then, from vegetable vendors to car manufacturers.
