Food, oil prices push inflation to 8-year high

Tribune News Service

New Delhi, May 12

Fuelled by high food and oil prices, retail inflation soared to an eight-year high of 7.79 per cent in April from 6.95 per cent in March, in what has been the fastest expansion since September 2014.

Editorial: Wheat Challenge

The fresh figures also meant that consumer price-based inflation (CPI) was above the Reserve Bank of India’s upper tolerance limit of 4 to 6 per cent for the fourth consecutive month. It was 4.23 per cent in April 2021. In fact, retail inflation has remained above 6 per cent since January 2022.

7.79% retail inflation in April

8.33% previous high in May 2014

Oil inflation at 17.28%

With Ukraine being India’s major sunflower oil source, supply crunch amid war with Russia has pushed inflation in ‘oils and fats’ category to a high of 17.28%

Rate hike likely again

RBI may consider a rate hike to tame inflation and is also likely to raise inflation projections at the monetary policy committee meeting next month, say sources

Breaching RBI’s comfort zone

• 6% RBI’s comfort limit for inflation
• Inflation above 6% for 4th month
• 40 basis points repo rate hiked last week to counter inflation

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• IndusInd Bank, Tata Steel, Bajaj Finance, Bajaj Finserv and Axis Bank were top losers

Food inflation, which accounts for nearly half the consumer price index (CPI) basket, reached a high in April and is poised to remain elevated due to higher vegetable and cooking oil prices as well as the higher freight costs due to high rate of diesel at the pump. Inflation in the food basket rose to 8.38 per cent in April from 7.68 per cent in March and 1.96 per cent in April last year.

However, the Union Finance Ministry was confident that the measures taken by the RBI and the Centre would get a handle on the rising inflation. It felt since aggregate demand is recovering gradually, the risk of sustained high inflation was low. “While inflation is expected to be elevated in 2022-23, mitigating action may reduce its duration. Evidence on consumption patterns further suggests that inflation in India has a lesser impact on low-income strata than on high-income groups,” it said in the monthly economic review.

The RBI has already hiked the repo rate by 40 basis points (bps) to 4.40 per cent in an off-cycle meeting on May 4. The Reserve Bank of India has been mandated by the government to ensure that inflation remains at 4 per cent with a margin of 2 per cent on either side. The industrial production grew 1.9 per cent in March and 11.3 per cent in 2021-22 fiscal, according to government data.

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