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Sunday, May 19, 2024, 4:26 am

Sunday, May 19, 2024, 4:26 am

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Despite new forces that could impact inflation, food prices continue to rise.

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In March, India’s retail inflation fell below 5% for the first time in five months, reaching 4.85%. Even though it was only slightly less than the 5.1% increase in prices seen in February, this was the slowest rate of price growth since May 2023. In keeping with Reserve Bank of India (RBI) expectations, the last quarter of 2023–24 saw the weakest inflation in three years, with an average of 5%. As predicted by the RBI, the average annual increase in consumer prices for the entire year was 5.4%, marking a four-year low. With the exception of energy and food prices, core inflation has been below 4% for the past four months. According to QuantEco Research, the overall fuel inflation rate in India fell to a four-year low of -2.7% in March, marking the seventh consecutive month of declines in the segment. Without a doubt, the ₹2 per litre reductions in petrol and diesel prices as well as the ₹100 price decrease in cylinders have been beneficial; but, the entire effect of these pre-poll measures won’t be apparent till this month. Despite these encouraging signs, there are still two major issues: food costs are unacceptably high, and total inflation is increasing for rural consumers who are already suffering from a weak monsoon. According to the Consumer Food Price Index, inflation has averaged a startling 8% from 2023 to 24 and 8.5% from January to March. Perishable supplies are still in danger due to the persistent heat waves that are affecting a significant portion of the nation, even while certain government measures have helped keep the pricing of various goods under control and expectations of a regular monsoon this year may relieve some pressure points, maybe starting in July. Furthermore, there are prominent trends of entrenched inflation for some essential goods – double-digit inflation in vegetables has been observed for five months, in pulses for ten months, and in spices for an astounding twenty-two months.

March saw a pick-up in cereal consumption, ending a seven-month trend of decline; increases were also observed in eggs, pork, and fish. The RBI projects inflation to be 4.9% in the first quarter of this year, even though they want it to drop to 4.5%. It is still difficult to achieve a steady decline to the 4% target, which has been out of reach for 54 months. While inflation in rural India increased to 5.45% in March from 5.34% in January and February, it eased tantalisingly close to the target for urban consumers in March at 4.14%. Even though a protracted period of high prices is already negatively impacting consumption, the rise in crude oil prices to a seven-month high of $90 per barrel this month, the waning prospects of interest rate cuts in the US and the EU, and the escalation of shipping costs due to conflict will likely raise more concerns about inflation in the months ahead.

ABHISHEK VERMA


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