Editorial: Tame soaring inflation
The woes of the middle class and the poor, already reeling under the impact of the coronavirus pandemic, are expected to worsen in the days ahead with the soaring inflation. The latest figures released by the Centre show that the wholesale inflation, as measured by the wholesale price index (WPI), rose to 14.5% in March, […]
The woes of the middle class and the poor, already reeling under the impact of the coronavirus pandemic, are expected to worsen in the days ahead with the soaring inflation. The latest figures released by the Centre show that the wholesale inflation, as measured by the wholesale price index (WPI), rose to 14.5% in March, second-highest in a decade. The annual wholesale inflation for 2021-22 fiscal was 13%, the highest since 2012-13 when it was recorded at 6.9%. The disquieting trend threatens to slow down the economic revival in the country. The World Bank has predicted that India’s GDP growth rate this year would be subdued to 8%, from its earlier projection of 8.7%, while the International Monetary Fund (IMF), in its World Economic Outlook report, has pegged the growth rate at 8.2%, instead of 9% it projected earlier. The Reserve Bank of India too has scaled down the estimate, from 7.8% in February to 7.2% now. More worrying is its inflation projection — an average of 5.7% in 2022-23, up from the 4.5% projected in February. Both estimates assume the average price of oil to be at $100 a barrel, an uncertain variable because it is susceptible to external factors. The ongoing war in Ukraine and the spiralling commodity prices threaten to hamper the recovery process. It is imperative for the government to tame inflation and boost consumption by providing direct benefits to the vulnerable sections even while continuing to do the heavy lifting in terms of capital spending.
Retail inflation for March, as measured by the Consumer Price Index (CPI), rose 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 CPI and WPI numbers in March suggests that the country is facing a broad-based inflationary trend. Even the central bank has admitted that the economy is not immune to the ‘negative externalities’ in the wake of the Russian invasion of Ukraine and that the surge in commodity prices is already posing inflation risks, especially through the conduit of surging imports. The war in Ukraine and subsequent economic sanctions against Russia have caused a rise in global prices of oil, commodities, fertilizers, foodgrains and metals, and the supply chains have been disrupted. Middle and lower-middle classes have started feeling the pinch with the government passing on the burden of 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. While it is desirable to switch to clean energy and stop using fossil fuels which cause more than 70% of greenhouse gas emissions, it cannot happen overnight. India needs more energy to meet the growing requirements.
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