The retail inflation of India has been constantly rising; however, recently, the inflation rate has declined exponentially to 7.04% in the month of May since last year. The same inflation rate, in the month of April, was as high as 7.8%, which also was an eight year high.
As the inflation rate has gone up, the consumer prices has continued to breach, as per lied down by the upper limit of 6% for the 5th straight month as meted out by the Reserve Bank of India (RBI). This data has been reflected in the official report released by the RBI last month.
In comparison to April, the prices have slightly edged down, which is mainly a result of statistical base effect and decline of central excise duties charged over diesel, petrol and LPG. A poll conducted by Bloomberg has detailed out the measures of the inflation – which explains the consumer price index (CPI), which is likely to drop down to 7.1% in May since 2021.
The effect of base pertains to a statistical reading, where a value like GDP or inflation is likely to appear as a lower standard once if the value is being compared with a period prior to an abnormally high value base effect or vice versa.
The inflation has globally been hit with an all-time high in decades, which is majorly an effect of Russia’s invasion in Ukraine. The invasion has resulted in the rise of prices of everything – from household needs, energy, food, and basic materials required to sustain life.
According to data meted out by the United Nation, inflation in the food and beverages industry has stood at 7.97% in May, in comparison to an 8.31% in the previous month. However, it is important to note that the hike in prices have hit the rural areas even more in April than May, denoting a drop of 7.01% against 8.38%. The rate of urban inflation is currently at 7.08%.
The rate of retail inflation (a division above the target of central bank’s figure of 4 [+/-2]%) has reached an average figure of 6.7% in the session of 2022-23. Several global economists have predicted the pressure of fear price extolled by the Russia-Ukraine conflict that has also triggered the supply of bottlenecks; denoting a similar scenario as of the 1970s inflation and slow economic growth.
The constantly rising consumer prices have led to a major challenge for all PSU and central banks that has directly increased the rates by 90 basis points. Reacting to the same, Kunal Kundu, a renowned Indian economist has said, “A fifth consecutive print above 6.0% and the second above 7.0% this year would continue to mean front-loaded rate action by the RBI”
Over the luring concern of the rising inflation, RBI had raised the repo rate by 50 basis points, which stands at a percentage of 4.9%. All central banks have also sharply raised its inflation projection – prices of all commodities are increasing to 7.5% by this quarter and 7.4% in September quarter.
