Slump, lower demand slow inflation in India

Poor demand has reduced the ability of firms to raise prices too steeply
New Delhi: A slow economic growth and poor demand has reduced the ability of firms to raise prices too steeply for most of the services used by the middle class. The bill on doctor’s consultation, education and stationery expenses for kids, clothing, bedding, footwear and even housing has not increased beyond a single digit in percentage terms between Octo-ber, 2013 and October 2014, according to a survey done by Assocham.
The year-on-year increase in the medical care expenses increased by just 5.56 per cent in October, 2014 as compared to the same month last fiscal.For education, including stationery expenses, the price rise has been noted at 7.21 per cent and for personal care effects, it is 6.41 per cent. Going forward, as there has been a sharp drop in petrol and diesel prices, the inflation of important services heads will remain subdued in the next six to eight months, said the Assocham. Besides, there are no immediate signs of economic turnaround that could have led to the wage pressure.
“These services, largely used by lower and middle class people have not seen a big rise in prices, though clothing, bedding and footwear segment has shown an increase of 7.57 per cent year on year. The price quotes mostly match the average CPI inflation of 5.52 per cent in October, on an average,” said Assocham. “The tepid income led to demand resistance, though it is hard to cut corners when it comes to medical care, education and housing,” it said.
However, there are heads like household requisites which are highly influenced by the income disposable with the consumers and the supply situation. While supply for such items is not a constraint, they saw squeeze in demand on account of factors such as slow growth in wages and salaries, said the chamber.The household requisites segment saw a price increase of only 3.16 per cent, much less than the retail inflation of 5.52 per cent. “Unlike items like food, medicines, the consumers have options to postpone these heads,” the Assocham paper noted.
The services such as these now claim most of the household expe-nses, especially among the middle class since the quality and availability of public services in education, hea-lth and even transport remains far from satisfactory, it added.
( Source : dc correspondent )
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