High inflationary trends

RISING inflation in India not only foretells greater misery for the beleaguered middle and lower middle classes, it also threatens to impede the economic revival in the country. The latest figures released by the government show that wholesale inflation, as measured by the wholesale price index (WPI), rose to 14.5% in March, its second-highest value in at least a decade. The annual wholesale inflation for the 2021-22 fiscal was 13%, the highest since 2012-13, when it was recorded at 6.9%. The retail inflation figure for March, as measured by the Consumer Price Index (CPI), had climbed to 6.9%, driven by a rise in food prices. Since CPI and WPI baskets have diverse components in terms of commodities and their volume, the simultaneous peaking of the CPI and WPI numbers in March suggests that India faces a broad-based inflationary trend.

Referring to the Russia-Ukraine conflict, the RBI has stated that Indian economy ‘is not immune to these negative externalities’, and that ‘the surge in commodity prices is already posing inflation risks, especially through the conduit of surging imports’. Indeed, war in Ukraine and economic sanctions on Russia have caused a rise in global prices of oil, commodities, fertilisers, foodgrains and metals, and the supply chains have been disrupted. In India, inflation was driven up in March also because the government — after keeping a tight leash on fuel prices in the preceding months — started passing on the higher import costs of oil commodities to the consumer. The full impact of the high inflation levels is likely to be felt in the coming months.

When it comes to fossil fuels and their cost — both actual and environmental — India needs to plan for the long haul, thinking in terms of generations and not decades. The move towards clean energy can only be incremental because it’s impossible to stop using fossil fuels in the absence of alternatives. The massive drop in crop yields this harvesting season shows that climate change can have a devastating effect on the agriculture sector — it’s estimated that fossil fuels cause more than 70% of greenhouse gas emissions. In this scenario, it’s imperative to work on finding clean alternatives — now, on a war footing. 

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