Retail inflation in India surges to 8-year high of 7.79% in April
India’s retail inflation surged to an annual rate of 7.79% in April due to higher prices for cooking oil and fuel, data from India’s Statistics and Planning Department showed on Thursday.
Headline INFLATION IN INDIA is now at its highest level since reaching 8.33% in May 2014.
Analysts had expected CPI inflation to be around 7.5%, up from 6.95% in March and 4.23% in April 2021. As a result, headline retail inflation is now still above the RBI’s ceiling tolerance of 6% for the fourth consecutive month.
Rural inflation rose to 8.38% in April from 7.66% in March and 3.75% in April 2021, while urban inflation rose from 6.12% in March and 4.71% in April 2021 7.09%.
Meanwhile, headline food inflation was 8.38% in April, compared to 7.68% the previous month and 1.96% in April 2021.
Core INFLATION IN INDIA, calculated to exclude “food and beverages” and “fuel and lighting” from headline inflation, surged from 6.6% in the mark to 6.8% in April
Last week, the Monetary Policy Committee, in an out-of-cycle move, had raised rates by 40 bps for the first time since August 2018. “The MPC expects inflation to rule at high levels, which justifies decisive measures and calibrated to anchor inflation expectations and contain them. second-round effects,” RBI Governor Shaktikant Das said, announcing that the MPC had voted unanimously to raise the policy interest rate.
“The sharp rise of INFLATION IN INDIA can be seen in April explains the out-of-turn rate hike by the RBI…
The MPC plans to hold its next meeting on June 6-8. Sinha expects the RBI to raise the policy rate by another 25 bps in June and a total of around 75-100 bps in FY23.
“We have raised our CPI forecast for FY23 to 6% from 5.3-5.5% previously. Nirmal Bang economist Teresa John said the longer-lasting Russia-Ukraine crisis and crude oil prices have been above $100/bbl, Whereas our base case is $80-90/bbl. A $10/bbl increase in crude oil prices would add about 25bps to baseline inflation.
With inflation soaring in India, the prices of cheap single-serving staple packs like soap and biscuits aren’t going down — they’re just getting lighter.
By slashing the weight of fixed-price goods — popular in low-income and rural areas, where prices are roughly the equivalent of a penny, a nickel or a dime — companies are using “contraction inflation” to counter higher input prices while retaining customers .
Why INFLATION IN INDIA a problem in India?
it reduces purchasing power or how much money can be bought. As it erodes the value of cash,
it encourages consumers to spend and hoard items that depreciate more slowly.
Causes-INFLATION IN INDIA
MONEY SUPPLY -INFLATION IN INDIA
Excessive supply of money (money) in the economy is one of the main causes of inflation. This occurs when a country’s money supply/circulation growth exceeds economic growth, reducing the value of the currency.
In modern times, countries have shifted from the traditional method of denomination by the amount of gold they own. Modern currency valuation methods are determined by the amount of currency in circulation, followed by public perceptions of the value of that currency.
There are many factors that affect the national debt, including how much a country borrows and spends. In the event of an increase in a country’s debt, the corresponding country has two options:
Taxes can be raised internally.
Additional money can be printed to pay off debt.
Demand pull effect
The demand-pull effect shows that in an economic growth, as wages increase within the economy, people will have more money to spend on goods and services. Increased demand for goods and services will cause companies to increase the prices consumers bear in order to balance supply and demand.