Inflation: How long will food items be cheap, when will inflation leave the witch, this good news came
inflation
Highlights
- The emphasis will be on monetary policy to control prices
- There will be a further increase of 0.80 percent in the repo rate in the coming time.
- Major companies already announced reduction in edible oil prices
Inflation:The bumper agricultural output from a normal monsoon and a hike in interest rates by the Reserve Bank of India (RBI) may provide relief on the inflation front till the end of the year. Economists have expressed this opinion. Inflation is at an all-year high as food and fuel have become costlier. While the government can also control inflation with fiscal measures such as further reduction of excise duty on petroleum products, experts believe that the emphasis will be on monetary policy to control prices.
Slight relief in retail inflation but wholesale increased
Retail inflation rose by 7.04 per cent year-on-year in May as against 7.79 per cent in April. On the other hand, wholesale inflation rose to a record high of 15.88 per cent in May. Three-fourth of the price rise is coming from food items and it is expected to be relieved due to normal monsoon. He said that the Reserve Bank has already increased the key policy rate repo by 0.90 percent and it may increase by 0.80 percent in the coming times. Major companies have already announced reduction in edible oil prices.
Better monsoon will bring down prices
S&P Global Ratings Economist Vishruta Rana said global commodity prices are a major driving factor for the rise in inflation and food prices will further depend on the monsoon. A better monsoon will boost agricultural production and keep prices in check. There are some additional policy options like lower excise duty, lower value-added tax, or direct subsidy on agricultural produce, but the emphasis is likely to be on monetary policy for the time being, Rana said. We expect a further increase of 0.75 per cent in policy rates going forward.
way to cut import duty
Sunil Sinha, chief economist, India Ratings and Research, said being a net importer of goods, India cannot do much on this front. However, import duties may be cut to mitigate the impact. However, it has its limits. Deloitte India economist Rumki Mazumdar said inflation is driven by supply chains both globally and domestically. EY India Chief Policy Advisor DK Srivastava said fiscal policies can be effective in reducing supply constraints.
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