New Delhi: A combination of normal rainfall, bumper agricultural production and reserve Bank of India ,reserve Bank of IndiaFurther hikes in interest rates to cut easy money into the system are the key to mitigating multi-year high inflation triggered by rising food and fuel prices, economists said.
While there is scope for the government to further reduce excise duty on petroleum products to control inflation from the fiscal side, the emphasis will be on monetary policy to control price pressure.
While retail inflation rose to 7.04 per cent year-on-year in May, slightly lower than the 95-month high of 7.79 per cent in April, wholesale or WPI inflation rose to a record high of 15.88 per cent in May. Three-fourths of the price increase is coming from food items and normal monsoon This will help cool it down as it will boost production and replenish reserves.
He said the RBI has already increased interest rates by 90 basis points as inflation remained above its 2-6 per cent target band for the fifth consecutive month and interest rates are expected to rise by 80 bps.
For the common man, the price hike is burning a hole in the pocket.
Edible oil prices, which was a major factor contributing to inflation, have started to moderate slightly with major players announcing some reduction.
47-year-old cab driver Sukhwinder Singh said, “Petrol and diesel have become costlier, but the cab fare has not increased that much in comparison. We also have to pay cab companies. We have very little left.” ,
A 40-year-old vegetable vendor said it has become difficult to manage two meals a day as people opt for home delivery instead of buying from vegetable vendors. “Medicines are getting expensive. We can’t even afford to fall ill these days.”
Economic Affairs Secretary Ajay Seth on June 16 said that inflation in India is mainly due to high energy and food prices and is expected to reduce in the coming months. “We all know that summer months are tough months in terms of vegetables and other commodities,” he said. “High crude oil prices are certainly a challenge and whatever measures are necessary and feasible are being taken.”
S&P Global Rating Economist Vishrut Rana Said that higher global commodity prices are a major driving factor for inflation and the outlook for food inflation, which has a heavy weight in the overall CPI basket, will depend on the monsoon – adequate rainfall will help farm produce and rein in prices. Will help.
“There are some additional policy options to address broader price pressures, such as lower excise duties, lower value-added taxes, or direct subsidies on agricultural produce, but for now the emphasis is likely to be on monetary policy. We look forward to a further 75 basis points.” Let’s expect rate hike this year. Tighter monetary policy will help in slowing the rising inflation,” Rana told PTI over email.
Chief Economist, India Ratings and Research Sunil Sinha Said that India being a net commodity importer, there is little it can do about it. However, there is a way to reduce the impact by cutting import duties and cutting subsidies. But these have their limitations and cannot completely eliminate the effect of imported inflation, which apart from higher prices also enters the economy through depreciation of rupee.
India Ratings and Research expects another 50-75 bps hike in its FY13 reminder, he added.
Deloitte India economist Rumki Majumdar said inflation is a result of supply chain disruptions both globally and domestically. Tighter sanctions on Russia Following the geopolitical crisis, new restrictions on oil and gas supplies from Russia, and recurring lockdowns in some countries (due to a Covid resurgence) have added to existing logistics and supply chain challenges.
EY India Chief Policy Advisor DK Srivastava said that in order to reduce supply constraints, fiscal policies that impact the real economy and focus on relevant supply constrained sectors may prove to be more effective. But they usually take a relatively longer time to bear fruit.
“We can expect some improvement in the situation by Q3 and Q4 of 2022-23,” Srivastava said.
Moody’s Analytics economist Shahana Mukherjee said inflation is expected to remain above RBI’s comfort level in the September quarter due to volatility in global commodity markets.
“Broad-based price increases from supply disruptions have contributed to the rise in India’s wholesale price index. Moody’s Analytics expects the benchmark repo rate to rise by 60 to 80 basis points in 2022.
The RBI in its bi-monthly monetary policy earlier this month raised the inflation forecast for the current fiscal by 100 basis points to 6.7 per cent.
The prices of all commodities have increased significantly in recent times. From vegetables, school fees, bus fares to home loans, everything is on the rise.
Taking advantage of the reduction in interest rates, many people opted for home loans. During the COVID pandemic, the interest rates were around 6.5 per cent and now it has gone up to 7.3 to 7.5 per cent. This difference in interest rate is spoiling the monthly budget of the middle income group, especially the employees. Nageswara Rao, 50, who has taken a home loan to buy a two-BHK home, says several adjustments have to be made to offset the increase in the home loan amount.
Farhana Begum, a private school teacher who lives in a rented accommodation, says it is becoming more and more challenging given the rising cost of everything. “Everything is getting expensive. But salaries are not increasing according to inflation. I take private tuitions too,” she said.
Arun K Nair, a hospital management specialist in Kochi, said: This is soon going to hit the rural economy very badly… the cities may come to a halt as the wholesalers will not bear the brunt anytime soon.
S Krishna Mohan, retired lecturer in Vijayawada: “I think increase in transportation cost due to increase in diesel and petrol prices fueled the rise in prices. Yes, it has become burdened with increase in LPG rates as well. I I can say the effect of this is high inflation on essential commodities, which clearly stings the common people.”
While there is scope for the government to further reduce excise duty on petroleum products to control inflation from the fiscal side, the emphasis will be on monetary policy to control price pressure.
While retail inflation rose to 7.04 per cent year-on-year in May, slightly lower than the 95-month high of 7.79 per cent in April, wholesale or WPI inflation rose to a record high of 15.88 per cent in May. Three-fourths of the price increase is coming from food items and normal monsoon This will help cool it down as it will boost production and replenish reserves.
He said the RBI has already increased interest rates by 90 basis points as inflation remained above its 2-6 per cent target band for the fifth consecutive month and interest rates are expected to rise by 80 bps.
For the common man, the price hike is burning a hole in the pocket.
Edible oil prices, which was a major factor contributing to inflation, have started to moderate slightly with major players announcing some reduction.
47-year-old cab driver Sukhwinder Singh said, “Petrol and diesel have become costlier, but the cab fare has not increased that much in comparison. We also have to pay cab companies. We have very little left.” ,
A 40-year-old vegetable vendor said it has become difficult to manage two meals a day as people opt for home delivery instead of buying from vegetable vendors. “Medicines are getting expensive. We can’t even afford to fall ill these days.”
Economic Affairs Secretary Ajay Seth on June 16 said that inflation in India is mainly due to high energy and food prices and is expected to reduce in the coming months. “We all know that summer months are tough months in terms of vegetables and other commodities,” he said. “High crude oil prices are certainly a challenge and whatever measures are necessary and feasible are being taken.”
S&P Global Rating Economist Vishrut Rana Said that higher global commodity prices are a major driving factor for inflation and the outlook for food inflation, which has a heavy weight in the overall CPI basket, will depend on the monsoon – adequate rainfall will help farm produce and rein in prices. Will help.
“There are some additional policy options to address broader price pressures, such as lower excise duties, lower value-added taxes, or direct subsidies on agricultural produce, but for now the emphasis is likely to be on monetary policy. We look forward to a further 75 basis points.” Let’s expect rate hike this year. Tighter monetary policy will help in slowing the rising inflation,” Rana told PTI over email.
Chief Economist, India Ratings and Research Sunil Sinha Said that India being a net commodity importer, there is little it can do about it. However, there is a way to reduce the impact by cutting import duties and cutting subsidies. But these have their limitations and cannot completely eliminate the effect of imported inflation, which apart from higher prices also enters the economy through depreciation of rupee.
India Ratings and Research expects another 50-75 bps hike in its FY13 reminder, he added.
Deloitte India economist Rumki Majumdar said inflation is a result of supply chain disruptions both globally and domestically. Tighter sanctions on Russia Following the geopolitical crisis, new restrictions on oil and gas supplies from Russia, and recurring lockdowns in some countries (due to a Covid resurgence) have added to existing logistics and supply chain challenges.
EY India Chief Policy Advisor DK Srivastava said that in order to reduce supply constraints, fiscal policies that impact the real economy and focus on relevant supply constrained sectors may prove to be more effective. But they usually take a relatively longer time to bear fruit.
“We can expect some improvement in the situation by Q3 and Q4 of 2022-23,” Srivastava said.
Moody’s Analytics economist Shahana Mukherjee said inflation is expected to remain above RBI’s comfort level in the September quarter due to volatility in global commodity markets.
“Broad-based price increases from supply disruptions have contributed to the rise in India’s wholesale price index. Moody’s Analytics expects the benchmark repo rate to rise by 60 to 80 basis points in 2022.
The RBI in its bi-monthly monetary policy earlier this month raised the inflation forecast for the current fiscal by 100 basis points to 6.7 per cent.
The prices of all commodities have increased significantly in recent times. From vegetables, school fees, bus fares to home loans, everything is on the rise.
Taking advantage of the reduction in interest rates, many people opted for home loans. During the COVID pandemic, the interest rates were around 6.5 per cent and now it has gone up to 7.3 to 7.5 per cent. This difference in interest rate is spoiling the monthly budget of the middle income group, especially the employees. Nageswara Rao, 50, who has taken a home loan to buy a two-BHK home, says several adjustments have to be made to offset the increase in the home loan amount.
Farhana Begum, a private school teacher who lives in a rented accommodation, says it is becoming more and more challenging given the rising cost of everything. “Everything is getting expensive. But salaries are not increasing according to inflation. I take private tuitions too,” she said.
Arun K Nair, a hospital management specialist in Kochi, said: This is soon going to hit the rural economy very badly… the cities may come to a halt as the wholesalers will not bear the brunt anytime soon.
S Krishna Mohan, retired lecturer in Vijayawada: “I think increase in transportation cost due to increase in diesel and petrol prices fueled the rise in prices. Yes, it has become burdened with increase in LPG rates as well. I I can say the effect of this is high inflation on essential commodities, which clearly stings the common people.”