High Inflation Shrinking Pocket

India had recorded a retail price inflation of over 3 per cent in the corresponding period of previous year. As per the data furnished by the National Statistical Office (NSO), CPI Urban rose to 7.26 per cent in September from 6.80 per cent in August. The CPI Rural increased to 7.43 per cent last month from 6.66 per cent in August. India’s sequential retail price inflation spiked in September to 7.34 per cent from 6.69 per cent in August. India’s consumer food price index during the month under review rose to 10.68 per cent against 9.05 per cent reported for August 2020. The CFPI readings measure changes in retail prices of food products. The data assumes significance as the Reserve Bank of India, in its last monetary policy review, maintained the key lending rates on account of elevated retail inflation. The Reserve Bank’s target for retail inflation is set within a band of +/-2 per cent. prices of vegetables and ‘pulses and products’ jumped by 20.73 per cent and 14.67 per cent, respectively, in September. Furthermore, meat and fish prices rose 17.60 per cent and eggs became dearer by 15.47 per cent. The prices of sugar and confectionery increased by 2.47 per cent. In addition, the fuel and light category under the CPI rose by 2.87 per cent. Above-average rainfall this year, a key determinant of yields in farming, is predicted to help reduce food-price pressures over the coming months. There are always trade-offs related to any policy. There are always those who gain and those who lose. For example, those with salaries and those who depend on savings such as pensioners will suffer when inflation is high. Personal financial planning would break down with high inflation, and everyone over age 50 would be adversely affected. The unhappiness with the inflation targeting regime stems primarily from those who feel that ever since the inflation targeting framework has been put in place, the Reserve Bank of India does not cut rates easily or as much as they would like to see. This is interpreted as the RBI not giving growth as much importance as inflation. It is felt that if we don’t have an inflation target, interest rates would have been lower. It is believed that higher inflation would support or enable higher growth.


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