Inflation remains the biggest challenge for Indian economy at the moment. For this reason, the RBI suddenly raised interest rates last week so that the inflation rate could be brought down by curbing the supply of cash in the economy.
NEW DELHI – Retail inflation in India has reached 7.79 per cent, the highest in eight years, despite efforts of the Reserve Bank of India (RBI) to ensure that it does not go above 6 per cent. This is the fourth consecutive month when the inflation rate retained this level making experts raise alarm over the economy.
The inflation in the month of March was 6.95 percent. Compared to last year, this is an even bigger jump. In April 2021, the inflation rate was 4.23 percent. This time, the prices of food items contributed to the inflation rate in a big way. As a result the inflation rate rose to 8.38 per cent from last month’s 7.68 per cent.
The price of almost all commodities have gone up. The price of edible oil increased by 17.28 percent in a month, the price of vegetables increased by 15.41 percent, the price of spices increased by 10.56 percent and the price of meat and fish increased by 6.97 percent.
With fuel prices increasing by 10.80 percent, there was an overall increase in the prices of all items. The prices of clothes and footwear have increased by 9.85 percent while that of fruits have also increased by 4.99 percent. The prices of health related items have also gone up by 7.21 percent and those related to transport and communication increased by 10.91 percent.
Inflation remains the biggest challenge for the Indian economy at the moment. For this reason, the RBI suddenly raised interest rates last week so that the inflation rate could be brought down by curbing the supply of cash in the economy.
Now, it is being feared that the reserve bank might maintain a similar policy in June due to which interest rates are likely to increase further. Coupled with this, the falling price of rupee against the dollar is adding to the woes of the economy.
Former Chief Economic Adviser to the Government of India, Kaushik Basu, said in a tweet that due to the falling value of the rupee, in a way inflation is also being imported into India, which needs to be stopped.
Since US inflation is so high, one would expect the Indian rupee to gain in strength vis-a-vis the dollar. Instead, the rupee is losing value. This is causing a double whammy with inflation getting imported into India. This spout needs to be turned off.
— Kaushik Basu (@kaushikcbasu) May 12, 2022