Retail Inflation Rate in India

Inflation is the annual percentage change in the cost to the average consumer of acquiring a basket of goods and services that may be fixed or changed at regular periods, such as annually. The consumer price index is used to calculate this. The retail inflation rate in India rose to 6.07 per cent in February 2022, the highest level since June 2021 and higher than market projections of 5.93 per cent.

Food inflation reached 5.85 per cent, the highest level since November 2020, with the cost of oils and fats (16.44 per cent), meat and fish (7.45 per cent), and vegetables (7.45 per cent) rising the most (6.13 per cent). Other factors driving higher prices (2.39 per cent) included fuel and light (8.37%), miscellaneous (6.52%), apparel and footwear (8.86%), housing (3.57%), and pan and tobacco (3.57%). 

Inflation stayed over the Reserve Bank of India’s target range of 2% to 6% for the second month. The government of Prime Minister Narendra Modi is concerned that rising energy and other commodity costs, combined with the rupee’s loss, could exacerbate inflationary pressures and hamper recovery.

Wholesale Inflation

After two months of relative quiet, wholesale price inflation spiked to 13.11 per cent in February, staying above the 10% line for the eleventh month in a row, with fuel and power inflation much higher than January 2022 levels. Inflation in manufactured goods has risen to about 10%, and with input costs remaining high, the high prices for producers may feed into additional retail inflation in the months ahead.

Beverages and food

Inflation in food and beverages reached a 15-month-high, and rising edible oil prices are expected to be a burden in the coming months. Despite retail inflation exceeding the RBI’s tolerance threshold of 6% for the second month, most economists do not expect the RBI to abandon its accommodative growth-focused policy posture.

Exports are increasing

According to a PTI report, India’s exports climbed by 25.1 per cent to USD 34.57 billion in February, owing to robust growth in engineering, petroleum, and chemicals, even as the trade gap widened dramatically.

CPI inflammation

The consumer price index (CPI) is widely used as the primary indicator of inflation in many developing countries. The CPI (combined) has been named the new standard for calculating inflation in India since April 2014. 

CPI data is usually collected monthly and with a large lag, making it inappropriate for policymaking. Changes in the CPI are used to calculate India’s inflation rate. Food prices, which contribute to nearly half of the CPI inflation, rose 5.85 per cent in the previous months, compared to 5.43 per cent before February. 

International trade

Inflation in India is generally caused by internationally traded commodities and the Reserve Bank of India’s (RBI) multiple attempts to devalue the rupee versus the dollar.

The threat of core inflation is alarming.

In January, core inflation, excluding food and fuel, fell slightly to 5.96 per cent from 6.01 per cent. However, economists said it remained high due to a higher-than-expected rise in prices. The November tax cuts on gasoline and diesel have helped customers relax. Prices of products like tea, cooking oil, and lentils, among others, have risen by 20% to 40% since the start of the Covid-19 outbreak.

Conclusion

Indian consumers must pay a higher price for commodities. Consumer goods companies continued to pass on input costs to consumers in the January-March quarter. As corporations battle high commodity and freight prices and margin challenges, biscuits, cosmetic goods, and household appliances will become more expensive in the upcoming months.

These prices are based on the MRP concept, and they will not be reduced once they have been raised. There is a strong case for the administration to acknowledge the necessity to put out the inflation fire. Fuel prices have been steadily rising, putting a strain on everyone. The government and the Reserve Bank of India can no longer remain unconcerned about inflationary concerns. While the RBI cannot be criticised for failing to predict the unexpected turn of events at the Russia-Ukraine border and the consequences, most observers believed that the RBI’s inflation forecasts were overly optimistic.