The latest official figures on inflation should be a cause of disquiet for the concerned quarters in the government. Wholesale inflation, measured by the wholesale price index, was 12.94 per cent last month. Retail inflation, measured by the consumer price index, for May was 6.30 per cent. The inflation, as per experts, has been triggered by spurt in prices of fuel and food items, including petrol, diesel, pulses and vegetables. There is already a rise in transportation fuel prices and the outlook for inflation becomes distinctly darker. Diesel, the main fuel for freight carriage, has now exceeded nearly Rs 90 per litre and is bound to feed into prices of almost everything being transported across distances — from fresh produce to intermediate and finished industrial goods etc.
Amid this, the governments at centre and local levels have been persisting with taxes on petrol and diesel.
While there are immediate measures to be taken at the government levels, the high inflation is set to reduce the real incomes of consumers, which will in turn slow down growth of consumer demand amidst covid-19 hit economy. Vast majority of people across India have reduced or nominal incomes from the last two years. Any further inflation can have devastating effects on aggregate demand. This, in turn, would worsen the push required to have a sustained recovery. One of the ways forward as per the experts is to reduce retail fuel prices by a cut in the taxes.
Silver lining in present times is the timely onset of the monsoon and it gives some reassurance. In case the rains sustain the early momentum and cover the key agrarian heartland adequately, the prospects for an ample harvest and a resultant moderation in food prices later in the year are bright. Still, for now, vegetable prices are reported to be surging.
There are some factors which are beyond the local government’s reach and the least it can do is to streamline the markets especially in controlling factors that are associated with pure malpractices by some unscrupulous people. The administration needs to face local challenges with a lot more authority than it is showing or lacking presently.
A good number of people are already reeling from job losses while income for the vast majority has dwindled and in such a scenario the persistently high inflation is untenable. Poor need support and rising inflation adversely impacts them.