Feb 17 2017, 15:04
The bigger unknown was the effects of demonetisation, and subsequent “remonetisation,” on food inflation. The currency recall has forced families to spend less, depressing the demand for goods including perishable products. Growth in consumer food price inflation (CFPI), a metric to gauge changes in monthly kitchen costs, moderated to 0.53 percent in January from 1.37 percent in December and 6.67 percent in January, 2016, reflecting how the cash crunch has hurt demand for both perishable and processed food items. Prices of vegetable and pulses appear to have been worst affected by restricted access to cash.
Patel believes this disinflation will likely be transient as cash gets quickly replenished in the banking system because of “remonetisation”,. “The effects of the demonetisation and now, the remonetisation also may impact some of the commodities where we have seen disinflation, but we do not know to what extent and for how long. It is most likely going to be short-lived,” he said.