This is the highest inflation in eight yeats, but it isn’t really a surprise – the RBI Governor had earlier said retail inflation was likely to be elevated. But, worryingly for the government, this figure exceeds the Reserve Bank of India’s upper tolerance limit of six per cent for the fourth month in a row.
Surpassing all previous estimates, India’s retail inflation soared 7.79 per cent in the month of April, the National Statistical Office (NSO) of the Ministry of Statistics and Programme Implementation informed through a press release today.
The NSO collects price data from 2,295 selected sample markets spread across the country (1,114 urban markets and 1181 villages) through personal visits by field staff of its Field Operations Division on a weekly roster.
According to the figures provided by the NSO, rural areas reported a higher consumer price index of 8.83 per cent, compared to urban areas that reported a 7.09 per cent consumer price index.
The inflation has been linked to the rising prices of fuel and food, according to NSO data.
According to the data released by the NSO, the prices of foodstuffs accounted for the bulk of the inflated prices. Food prices form almost half of the consumer price index basket.
This is the highest reported figure for inflation in eight years.
Yet, this is not a surprise. RBI Governor, Shaktikanta Das had said on 4 May that retail inflation was likely to be elevated.
But, worryingly for the government, this figure exceeds the Reserve Bank of India’s upper tolerance limit for the fourth month in a row. The government wants the RBI to hold inflation in a two and six per cent range. This news is particularly bad in the face of rising unemployment.
The RBI had, earlier this month, hiked its repo rate by 40 basis points to 4.40 — in turn, allowing for commercial banks to hike their interest rates. This decision followed an off-cycle meeting and came after a gap of four years.
All developments point towards further tightening of monetary policies in an economy impacted by COVID-19 and the ongoing war between Ukraine and Russia. But the inflation also builds on earlier shocks following the demonetisation of currency bills five years ago and a hurriedly implemented goods and services tax regime.
The RBI is scheduled to meet on 6 June as inflationary pressures seem to get out of hand.
Image: Hippops, licenses to use Creative Commons Zero – CC0