Inflation jumps to 17-month high, and could rise further. Here’s why

A boiling global crude oil market is singing Indian pockets. Retail inflation in the country is at its highest level since October 2020. And this, when the impact of the retail fuel price hike, which began after state elections ended in March, has not yet been fully captured yet. 

Data released by the government this week shows that the consumer price index (CPI) inflation for March 2022 was at 6.95% as against 6.07% during the preceding month.   

Food inflation for March was even higher at 7.47% as against 5.93% in February. 

Even if one excludes food and fuel, the core inflation for March was 6.53%, as against 6.22% in February, showing that most commodities have become costlier over the space of the past month. 

Check out: US inflation at 41 year high of 8.5% for Mar-22

How bad are these indicators?

Simply put, the prospects don’t seem very good. Retail inflation has exceeded the target of the Reserve Bank of India’s Monetary Policy Committee for the third time in a row. This has even led the committee to revise its target upwards. 

What is the central bank’s projection for inflation for the current financial year?

The RBI has raised its inflation projection to 5.7% for FY23, from the earlier 4.5%. The central bank assumed a crude oil price of $100 per barrel over the ongoing financial year. 

But why is food inflation rising so sharply?

Citing Aditi Nayar, chief economist at ICRA, a BloombergQuint news report says that food and beverage prices have risen sharply owing to an unexpected increase in the price of meat and fish. 

Other analysts like Care Edge chief economist Rajani Sinha say that prices are also rising because of supply disruptions caused by the Ukraine-Russia war. This has led to the prices of crude, edible oils, food and fertilisers go soaring high. 

What are the major food items whose prices have spiked?

Prices of cooking oils, meat and fish, fruits, spices and milk have jumped. 

What are the major non-food items that have seen the most price rise?

Personal care, clothing and footwear, recreation, transport and communication and household goods and services. 

How much did the prices in some of these two categories go up by?

Prices of oils and fats were up 18.79% in March, while those of vegetables were up 11,64%. Clothing and footwear were costlier by 9.4% while fuel and light inflation for March was at 7.52%. Pulses prices went up by 2.57% in March while housing inflation was at 3.38%. 

Also read: India inflation touches 17 month high of 6.95%