In turn, this was explained by the decline in vegetable inflation, which went from 37.4% to 26.11% as vegetable prices fell from their peaks. But for the majority of the food basket’s goods, inflation remains high. For cereals, pulses, and spices, it is above 10%, while for milk and milk products, it is above 7%.
Source: News 18
Because the costs of the majority of the commodities are not going to decrease, consumers are already suffering and will continue to do so. Variations typically only occur in vegetable cases. Additionally, it should be emphasized that rural inflation, which for August was 7.02 percent, continued to exceed urban inflation, which was 6.59 percent.
Inflation is anticipated to remain high and exceed the Reserve Bank of India’s prediction of 6.2% for this quarter, even if vegetable prices decline. Additionally, this will exceed the RBI’s tolerance limit. This is as a result of both rising crude prices and the effects of a weak monsoon on several regions of the country’s crops.
The growing El Nino phenomenon is likely to have a negative impact on the rabi harvest. If food prices continue to rise, so will overall inflation rates. Because it understands that a rise in food prices during the months leading up to elections will be politically detrimental, the administration has implemented certain supply-side initiatives to keep the prices in check. It has allowed the selling of wheat and rice on the open market, set stock limitations on specific pulses, and prohibited the export of some wheat and rice kinds. Their effect has not yet been determined.
Source: The Economic Times
One question that arises is how the RBI will handle inflation as the government uses its instruments to combat it. The Monetary Policy Committee (MPC) has been cautioned by Governor Shaktikanta Das to keep an eye on the inflation trajectory. Demand can be stifled by persistently high inflation, particularly when food prices rise.
The recent price changes showed how they can unjustly affect some demographic groups. Last week, tomato prices in some regions of the country, which had soared to Rs 300 per kg, dropped to Rs 2, forcing farmers to throw away their produce out of desperation. When the prices of their produce increase and contribute to inflation, most farmers do not benefit. The greater level of rural inflation demonstrates that they are truly struck harder than others. However, when prices fall sharply, they are severely hurt.
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