Where prices are hurting

Source– The post is based on the article “Where prices are hurting” published in “The Indian Express” on 19th August 2023.

Syllabus: GS3- Indian economy

Relevance: Issues related to inflation

News– As the Reserve Bank of India has released its August monthly bulletin.

What are the inflation prospects of the country?

The inflation for July 2023 reached a 15-month peak of 7.44 percent. It indicates that the issue of inflation remains unresolved.

Supply chain pressures are gradually easing and wage growth is slower than anticipated. The conditions are becoming favorable for a reduction in core inflation.

Geopolitical tensions have increased the prices of agricultural commodities, metals, and energy. It has raised concerns about food and energy security and the potential impacts on core inflation.

This marks the third time when the retail inflation rate is higher than the upper boundary of the RBI’s medium-term inflation target range of 4+ /–2 percent in this calendar year.

What are the main revelations of the recently released RBI bulletin?

The inflation rate has risen, particularly for essential items like vegetables, cereals, pulses, milk, and dairy products. This increase in prices has impacted both retail and wholesale inflation levels.

In the month of July, India experienced a retail inflation rate of 7.44 percent, reaching its highest point in 15 months.

Among the 36 states and Union Territories, 15 of them registered a retail inflation rate surpassing the national rate of 7.44 percent in July. Additionally, 24 states and UTs had an inflation rate exceeding 6 percent.

The eastern regions and Jammu & Kashmir along with Ladakh exhibited better outcomes.

States in eastern and Northeastern India, excluding Manipur and Tripura, saw a retail inflation rate lower than 6 percent in July 2023.

Food and beverages observed a significant surge in inflation. It reached 10.57 percent in July compared to 4.63 percent in June.

The inflation rate for cereals and related products has remained in double digits for eleven consecutive months. It was 13.04 percent in July.

Pulses have experienced inflation of over 5 percent for the last four months. It has escalated to double digits since June.

After contracting for eight months, vegetable prices surged to 37.34 percent in July.

How rising inflation is impacting households?

The upward trajectory of food prices is expected to place additional strain on household budgets.

A recent Crisil report highlighted that the cost of preparing a “thali” meal at home increased significantly for the third consecutive month in July, primarily due to the price of tomatoes.