oppn parties Inflation Breaches RBI's Upper Band
OPINIONS : Strongly Expressed

January 29, 2023

People Are Talking About

Welcoming 2023

News Snippets

  • RBI governor Shaktikanta Das says that inflation is easing and the current account deficit is manageable
  • Adani Enterprises FPO sees just 1% subscription on the first day as the stock goes down to Rs 2762, much below the price band of Rs 3112-3276
  • Stocks bleed on Friday post the Hindenburg report as Adani stocks are hammered: Sensex loses 874 points to 59330 and Nifty 287 points to 17604
  • Rs 263cr TDS scam detected by the I-T department. A mid-level officer was the kingpin and had amassed huge wealth
  • Women's U-19 World Cup -India reaches the final by beating New Zealand by 8 wickets
  • New Zealand beat India by 21 runs in the first T20 as spinners choke Indian batters
  • Sania Mirza and Rohan Bopanna lose in the Australian Open finals
  • Sania Mirza and Rohan Bopanna lose in the final of the Australian Open
  • India to play New Zealand in the first T20 of the three-match series in Ranchi today
  • RBI has proposed special purpose vehicles (SPEs) mechanism to sell bad loans to interested investors via securitization
  • JD(U) decides not to attend the Bharat Jodo Yatra finale in Srinagar
  • Hindenburg defends its report on the Adani group, dares Gautam Adani to sue it in the US
  • BJP's talks with Tipra Motha in Tripura make no headway but the party is confident of winning in the ensuing elections
  • Pathan is a super hit at the box office: Rs 57cr in India (worldwide Rs 106cr) on Day 1 and then Rs 70cr on Day 2 which was Republic Day holiday
  • Centre tells Delhi HC that Covid vaccines can't be mixed when taking the second dose
A Mirage2000 and A Sukhoi 30 of the Indian Air Force on a training mission crashed separately, in Bharatpur in Rajasthan and Morena in Madhya Pradesh, killing one pilot
oppn parties
Inflation Breaches RBI's Upper Band

By Ashwini Agarwal
First publised on 2021-06-15 14:03:06

Even as the second wave recedes and a semblance of order is restored in the vaccination drive, India has to grapple with inflation. The month of May showed that prices have firmed up, both at the wholesale and the consumer level. The Wholesale Price Index (WPI) hit a fresh high of 12.9% (though on a low base) and the retail Consumer Price Index (CPI) rose to 6.3%. This means that the CPI has breached the upper band prescribed by the RBI. The food price index was at 5%, much above the 2% in April. Core inflation has also shot up to a seven-year high.

In food, although vegetable prices eased in May, edible oils rose to 30.8% while eggs were at 15.2%. The price of edible oils is causing concern for most households as they seem to be galloping north very fast. The global price increase and local restrictions in some parts of India have contributed in firming up the prices. Onions have also shown an increase to 23.2% mainly due to higher demand and problems of logistics.

The WPI has been pushed up due to rising fuel and power costs. Manufacturing costs have increased for most products due to the rise in the cost of several inputs and rise in global commodity prices and this is reflected in higher price for products.

Although the CPI has breached the RBIs upper band, it is expected that the apex bank will continue to maintain its accommodative stance and is unlikely to touch rates in the short term. Economists expect the inflation to be between 5 and 6% in the next couple of months.

But with fuel and commodity prices not expected to come down in the next few months, it seems that India will have to live with high inflation, low demand and moderate growth at least till the end of the second quarter of this year. The festival season might push up demand and if a good number of people are vaccinated by September/October and restrictions are removed, there will be a turnaround. That is, if the third wave does not hit before that.