India is struggling through supply disruptions and a rise in food prices.
India’s wholesale prices rose at a seven-month high rate of 1.32 per cent in the month of September, after rising 0.16 per cent in the previous month. It was the second straight increase in wholesale prices, and the strongest pace since February, as the economy gradually recovers from the pandemic shock. While vegetable prices surged 36.5 per cent, the prices of potato rose by 107.6 per cent in the month. Among the major groups, the prices of food items rose at the fastest rate of 6.92 per cent in the month, according to the Ministry of Commerce & Industry.
Given the regional lockdowns and rising cases of coronavirus, inflation is on a rise in India. The World Economic Outlook released by IMF also highlighted that India is struggling through supply disruptions and a rise in food prices. While inflation in most of the countries declined sharply in the initial stages of the pandemic, it has picked up in some countries, including India, the IMF report added.
The rise in inflation is also expected to limit the scope of the Reserve Bank in further slashing the repo rate. Unless the inflation falls below the higher band of 6 per cent, we don’t expect RBI to cut rates despite RBI Governor Shaktikanta Das stating to ‘look through inflation’, said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.
Meanwhile, the retail prices skyrocketed in September, taking the CPI inflation to 7.34 per cent. The retail prices rose primarily due to high food prices, which grew at 10.68 per cent in the month. Among the food items, vegetable prices soared by 20.7 per cent, meat and fish by 17.6 per cent, eggs by 15.5 per cent, pulses by 14.7 per cent, and the prices of spices rose by 11.7 per cent in September.