oppn parties Inflation Breaches RBI's Upper Band

News Snippets

  • The Indian envoy in Bangladesh was summoned by the country's government over the breach in the Bangladesh mission in Agartala
  • Bank account to soon have 4 nominees each
  • TMC and SP stayed away from the INDIA bloc protest over the Adani issue in the Lok Sabha
  • Delhi HC stops the police from arresting Nadeem Khan over a viral video which the police claimed promoted 'enmity'. Court says 'India's harmony not so fragile'
  • Trafiksol asked to refund IPO money by Sebi on account of alleged fraud
  • Re goes down to 84.76 against the USD but ends flat after RBI intervenes
  • Sin goods like tobacco, cigarettes and soft drinks likely to face 35% GST in the post-compensation cess era
  • Bank credit growth slows to 11% (20.6% last year) with retail oans also showing a slowdown
  • Stock markets continue their winning streak on Tuesday: Sensex jumps 597 points to 80845 and Nifty gains 181 points to 24457
  • Asian junior hockey: Defending champions India enter the finals by beating Malaysia 3-1, to play Pakistan for the title
  • Chess World title match: Ding Liren salvages a sraw in the 7th game which he almost lost
  • Experts speculate whether Ding Liren wants the world title match against D Gukesh to go into tie-break after he let off Gukesh easily in the 5th game
  • Tata Memorial Hospital and AIIMS have severely criticized former cricketer and Congress leader Navjot Singh Sidhu for claiming that his wife fought back cancer with home remedies like haldi, garlic and neem. The hospitals warned the public for not going for such unproven remedies and not delaying treatment as it could prove fatal
  • 3 persons died and scores of policemen wer injured when a survey of a mosque in Sambhal near Bareilly in UP turned violent
  • Bangladesh to review power pacts with Indian companies, including those of the Adani group
Devendra Fadnavis to be the next chief minister of Maharashtra after Eknath Shinde agrees to join the government as deputy CM
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.