The continuous demand to tighten his belt may soon leave the common man with no waist at all! Latest figures from the National Statistical Office (NSO) show India’s retail inflation shooting to 6.3% in May, breaching the Reserve Bank’s target of above 4% (+/-2%) for the first time in six months. After easing to a three-month low of 4.29% in April, inflation has shot up on the back of rising food and fuel prices. In April, the government kept fuel on a plateau as six states went to the polls. However, soon after the elections were over on May 2, petrol and diesel prices shot up 11.6%. Food inflation has now increased to 5% and significantly, the costs of protein foods like meat, fish and eggs have spiralled up the most.
Wholesale price-based inflation too has hit an all-time high of 12.5% in May as the markets saw a spike in prices of manufactured products, crude oil and mineral oils. The retail price of diesel/petrol, which has a cascading inflationary effect on a spectrum of goods, is unfortunately inching up and will add to inflation. With oil demand rising and the Saudis continuing to press for production, investment banker Goldman Sachs estimates Brent crude rising to $80 a barrel over the next six months, before easing off.
This scenario is a cause for concern for a Covid-hit economy. It has left very little headroom for the RBI. Cutting interest rates any further would only add to the inflationary pressure. So would printing bank notes, as some quarters have been advocating, to galvanise spending. In today’s context, high inflation is double jeopardy for the common man. Millions have lost their jobs in the lockdown, and those who have them have taken big wage cuts. This is hardly a time to be facing spiralling prices of daily needs such as meat and vegetables. One hopes the Central government steps in quickly to ensure that the prime minister’s promise of free food till Deepavali for 800 million people is implemented immediately and that proactive steps are taken to cool overheated prices.