Sobering Inflation

Why in news?

As per the recently released Consumer Price Index report, inflation moderated to 6.93% in November when compared to previous month’s data of 7.61%.

Why Inflation moderated?

Headline level of inflation eased due to slower price rise in the food and beverages which is a major driver of retail inflation.
Due to bumper kharif crops harvests, inflation of cereals slowed down to 2.32% from 3.39%.
Increased market arrivals of vegetables slowed down the price rise of food items.
Inflation for vegetables slipped from 22.51% in October to 15.63% in November.
Earlier RBI in its monetary policy statement reported that prices of perishables will get softened in winter.
Petrol and diesel prices eased to 11.06%.
However inflation still remained in double digits for 6 items in the basket excluding vegetables.
Protein rich foods- pulses, eggs, meat and fish-registered higher levels of inflation.

Will this trend continue in the coming months?

With recovery from the pandemic, it is unlikely to foresee any further appreciable softening of food prices in December.
This because of higher transportation costs of farm produce from agrarian hinterland to destination.
This will be in contravention to the RBI’s forecast of inflation in the third-quarter of the fiscal- 6.8%.
To achieve RBI’s target, headline inflation need to be around 5.86% for this month.
However in the next 3 months general prices are expected to rise, policymakers must guard against easing vigilance on prices.
But a growth-supportive measure needs to be taken keeping price stability at the focus.
Unchecked inflation can cause multiple risks to the nascent economic recovery.

Source: The Hindu