High retail inflation adds to slowdown woes in Indian economy

High retail inflation comes as a double whammy for the government, which is saddled with the decade’s slowest rate of growth at 5%.

Published: 17th January 2020 04:00 AM  |   Last Updated: 17th January 2020 08:40 AM   |  A+A-

Vegetables, inflation

For representational purposes (File Photo| EPS)

Data released a few days ago by the National Statistical Office (NSO) showed that retail inflation as measured by the consumer price index (CPI) rose by an astronomical 7.4% for December last year, the highest in over 5 years.

Worryingly, the graph has been steadily on the rise—it was 5.5% for the previous month of November and multi-fold higher than the comparable month of December 2018 when retail inflation was just 2.1%. It is food prices which is mainly responsible for this spike.

The food price index for December rose sharply to 14.1%, the highest recorded since the new series was introduced in January 2014.

The soaring prices of vegetables and pulses have been driving this extraordinary spiral. Vegetable prices, mainly onions, have risen annually by 60.5% while pulses went up by 15.4%. Increase in cost of transportation too has been adding to the problem, while unseasonal rains have destroyed vegetables and crops, contributing to the overall misery. Worse, the inflationary trend is expected to persist in the coming months with prices expected to ease only when the rabi crop and a new batch of potato and onions hit the market in April.

High retail inflation comes as a double whammy for the government, which is saddled with the decade’s slowest rate of growth at 5%. This will force Reserve Bank, keen to ease interest rates, to maintain status-quo given the high inflation; the tight lending policy, in turn, will continue to have a drag effect on the economy.

The rising food inflation is playing havoc with the tight budget of working-class and middle-income earners.

Millions are having to choose between the essentials of feeding their families and the needs of education and health care.

For swathes of a population that is already low on protein and vitamins, foregoing meat and pulses will have a long-term effect on their health.

Urgent intervention by the government on the supply side, even if it means additional imports, is called for to ensure the plight of the people does not deteriorate further. 


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