Click to play videoNew Delhi: As inflation slips into the negative zone deflation is the new reality.
In August 2008 inflation hit 12.63 per cent, the highest in 16 years. But on June 18, the figure stands at -1.61 per cent, slipping into the negative zone for the first time since 1977-78. So should consumers be rejoicing? Not really, say analysts.
"What is important to recognise is why is deflation taking place... that might be little scary for common man because deflation suggest that there is so little demand in the economy that prices are actually falling," says HDFC Bank Chief Economist Abheek Barua.
Prices of goods and services fall when there is less money in the system. Lack of money means consumers spend less which in turn affects profits earn by companies and industrial production slows down.
Companies have to cut costs, perhaps by job cuts.
"Jobs, salaries income growth business opportunities are in adverse environment that's why prices are coming down. Deflation is the symptom of deeper economic malice. Taking a broader perspective, if deflation persists for long, it can be very negative," says Barua.
Prices of many fruits and vegetables may have come down by almost half since last year. But cheaper is not always the better.
(With inputs from Mike Sangma)
(For updates you can share with your friends, follow IBNLive on Facebook, Twitter, Google+ and Pinterest)
 |
|
 |
 |
 |
|
More on IBNLive Right Now
TOP NEWS
MOST SHARED
PHOTOGALLERY
