{"id":186796,"date":"2022-05-27T20:48:15","date_gmt":"2022-05-27T15:18:15","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=186796"},"modified":"2022-05-27T20:48:15","modified_gmt":"2022-05-27T15:18:15","slug":"the-indian-consumer-will-have-to-spend-more-for-a-little-longer","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/the-indian-consumer-will-have-to-spend-more-for-a-little-longer\/","title":{"rendered":"The Indian consumer will have to spend more for a little longer"},"content":{"rendered":"\n

News<\/strong>: In April 2022, the consumer price index-based inflation<\/strong> for food had reached 8.4%. This implies that the gap between wholesale<\/strong> and retail food inflation has been narrowing, suggesting a higher pass-through of input costs<\/strong>.<\/p>\n

Situation of Inflation<\/strong><\/h5>\n

Around 40%<\/strong> of overall consumer spending is on food. Its purchase frequency is also higher. Thus, food witnessed a higher impact on inflation expectations.<\/p>\n

The headline inflation <\/strong>started picking up for imported commodities. For example, edible oils and cereals.\u00a0 Now, domestically produced items are getting caught in the price fire.<\/p>\n

What are the causes of concern?<\/strong><\/h5>\n

The average food inflation, of 6% in the past three years, is significantly higher than the pre-pandemic five-year average of 3.5%.<\/p>\n

The driving forces behind current inflation are exogenous<\/strong>. Further, their impact will become worse when domestic demand improves.<\/p>\n

There is little that monetary<\/strong> and fiscal policies<\/strong> can do to soften the primary exogenous <\/strong>blow in the short-term.<\/p>\n

The frequency of purchase, rather than the share of expenditure, shapes inflation-related expectations of consumers.<\/strong><\/p>\n

Why is food inflation surging?<\/strong><\/h5>\n

Proximate Causes<\/strong><\/p>\n

There are three reasons: (1) a surge in transportation costs; (2) rising cost of production; and (3) elevated global food prices.<\/p>\n

Ultimate Causes<\/strong><\/p>\n

The Russia-Ukraine war is a cause of concern. It is affecting everything, including the food prices.<\/p>\n

A sharp rise in transportation costs has pushed up retail prices of agricultural commodities like vegetables,<\/p>\n

The domestically produced commodities<\/strong> such as wheat and products, coarse cereals, and meat are witnessing inflation due to a low base and a sequential price rise in these components.<\/p>\n

The food production costs have risen also due to increase in fertiliser, pesticides and also animal feed prices.<\/p>\n

Impact of the inflation<\/strong><\/h5>\n

Rising food inflation<\/strong> hurts<\/strong> consumers a lot more<\/strong> than inflation in other commodities since households do not have much discretion in altering food consumption.<\/p>\n

The consequences are more adverse for the rural population<\/strong> which spends a higher share (around 47%) than the urban (roughly 30%) on food; and the bottom 20%<\/strong> of the population which spend out a higher share<\/strong> (60%) on food consumption.<\/p>\n

Measures Taken by the government<\/strong><\/h5>\n

The Monetary policy<\/strong> has seen hiking of the repo rate<\/strong>, the cash reserve ratio<\/strong> and gradually winding down the easy liquidity situatio<\/strong>n.<\/p>\n

On the fiscal policy front<\/strong>, the government has reduced excise duties <\/strong>on petrol and diesel, increased fertiliser and cooking gas subsidies, and allowing duty-free imports of edible oils.<\/p>\n

Way Forward<\/strong><\/h5>\n

The RBI is expected to raise repo rates by another 75-100 basis points in the rest of this fiscal.<\/p>\n

The pressure on prices of agricultural commodities will take time to soften. Therefore, the government can go for extending the Pradhan Mantri Garib Kalyan Anna Yojana<\/strong> beyond the stipulated period.<\/p>\n

Source<\/strong>: The post is based on an article \u201cThe Indian Consumer will have to spend more for a little longer<\/strong>\u201d published in the \u201cThe Hindu\u201d on 27th<\/sup> May 2022.<\/p>\n","protected":false},"excerpt":{"rendered":"

News: In April 2022, the consumer price index-based inflation for food had reached 8.4%. This implies that the gap between wholesale and retail food inflation has been narrowing, suggesting a higher pass-through of input costs. Situation of Inflation Around 40% of overall consumer spending is on food. Its purchase frequency is also higher. Thus, food… Continue reading The Indian consumer will have to spend more for a little longer<\/span><\/a><\/p>\n","protected":false},"author":10328,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216,10498],"class_list":["post-186796","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-the-hindu","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704676326},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/186796","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10328"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=186796"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/186796\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=186796"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=186796"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=186796"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}