Retail inflation continues to breach RBI threshold of 6%, causing widespread distress to households
Retail inflation, marked by the consumer price index (CPI), shot up to 6.95 per cent in March 2022, the fastest pace of price gains in 17 months, as per data released by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI) on April 12.
The spike in March came after the 6.01 per cent in January and 6.07 per cent in February 2022. The previous high was recorded at 7.61 per cent in October 2020.
A surge in food price inflation, combined with rising fuel prices (as a result of Russia’s war on Ukraine) and producers passing on higher commodity prices and input costs to consumers across goods and services, drove the overall CPI-based inflation to its highest in about one-and-a-half years.
This also marked the third straight month when inflation exceeded the Reserve Bank of India’s (RBI) tolerance threshold of 6 per cent. The RBI has projected retail inflation at 5.3 per cent for FY22 (2021-22), with Q4 inflation (i.e., January-March 2022) at 5.7 per cent before easing to 4.9 per cent in Q1 FY23 (i.e., April-June 2022).
However, the central bank’s own survey, conducted in March, involving over 6,000 urban households in 19 major cities, had revealed that households fear consumer inflation may move into double-digits in the next three months to one year.
With no end in sight to the war in Ukraine, the rising global fuel prices and their ripple effects on transport and logistics costs are expected to intensify in April, according to Vivek Rathi, director, research at Knight Frank India.
The unchecked inflation is worrying as it has spread across most categories, including food and beverages, edible oils and fats, vegetables, meat and fish, health, household goods and services, and personal care and effects.
Consumers in rural India faced a higher level of inflation than urban residents, with overall rural inflation at 7.66 per cent, according to the NSO data. “Our analysis shows the poor are bearing the burden of inflation the most, given that food which occupies the largest share of their consumption basket recorded the sharpest rise,” said Dharmakirti Joshi, CRISIL chief economist.
For March, among the states, Bengal recorded the highest retail inflation at 8.85 per cent while Uttar Pradesh and Assam both clocked 8.19 per cent. Coupled with joblessness and no social security, distress is bound to intensify.
