Due to supply shocks from Russia’s invasion in Ukraine and heavy rainfall, the prices of daily consumables have climbed in last two years. Daily consumables such as cereals and vegetables form the largest category in the inflation basket
India’s retail inflation touched a five-month high of 7.30 per cent in September. According to media agencies the surge in food prices, keeping well above the Reserve Bank of India’s (RBI) upper tolerance band for a ninth month.
Due to supply shocks from Russia’s invasion in Ukraine and heavy rainfall, the prices of daily consumables have climbed in last two years. Daily consumables such as cereals and vegetables form the largest category in the inflation basket.
Recovering from COVID-19 pandemic-induced economic shocks, India’s poor and middle classes will be further suffering the increases as they spend a large part of their income on food, believes market experts.
The economists suggested that inflation rose to an annual 7.30 per cent in September from 7.00 per cent in August, being measured by the Consumer Price Index. If realised, that would be the highest since May 2022.
Forecasts for the data, due at 1200 GMT on 12 October, ranged between 6.60 per cent and 7.80 per cent. Majority of the economists, expected inflation to be 7.00 per cent or higher, suggesting the bias was for prices to go up further.
The Indian government has suggested measures to calm local prices, including some export restrictions on rice to temper inflation. But consumer prices have remained uncooperative and stayed above the RBI’s upper tolerance limit this year.
A weakening currency is also of no help. The battered Indian rupee hit a new low of 82.32 per dollar on 30 September. It was expected to remain under pressure over the next six months, according to analysts.
That will probably put pressure on the RBI, as it raised its key repo rate by 190 basis points in four moves this year. The aim behind hiking the repo rate is to intensify its interest rates hikes, as according to the RBI.