New Delhi: Ever since the Second wave hit India. Mini-lockdowns, curfews, and restriction of transport across the country have disrupted supplies and pushed up prices of some essential goods to the top, though availability remains better than a year ago when customer hoarding and broken supply chains led to severe shortages the prices are unstable since the first lockdown in April 2020.
There were fewer supply chain disruptions during the second wave lockdown compared with last year. Yet, there is a general rise in inflation globally because of the elevated domestic price pressures in their own countries. Higher international prices for commodities including crude, cotton, edible oils, and gold are reasons behind the rising prices of essentials.
The situation was almost back on track in march this year as overall country retail inflation, measured by the Consumer Price Index (CPI), dropped to consumer price inflation rose to 5.30% in in April. But in May, the Second wave becoming the 3-month highest rated.
Transport costs are up nearly 13% than the previous year because of more than an 8% rise in diesel and petrol prices so far this year, pushed up by higher federal and state taxes. Petrol prices are also high as Rs. 93/L in the National Capital Delhi.
The country’s wholesale price inflation (WPI) touched a record 11-year high at 10.49% in April due to the rise in prices of oil, manufactured goods, minerals, and food products such as eggs and meat.
Talking of the current prices here is a little data to show how the prices have been hiked in 2 months.
March 2021 May 2021
Edible Oil Rs.80/L Rs.180/L
Rice(basmati) Rs. 55/kg Rs. 60/kg
Flour Rs.25/kg Rs. 35/kg
Vegetables Rs.20-40/Kg Rs. 20-80/Kg
Such data is persistent in showing that essential commodities are getting affected due to the pandemic. The prices of oils have shocked the nation as it has been the worst hit by the Pandemic. The prices of all types of oils are at 11 years high.
This rise in essential commodity prices is worrisome and gives tension as it can uplift the retail price inflation in the coming months because of the increased fuel, power, and raw material costs imposed by the provider companies to consumers. Transportation and production costs are already rising, and experts have predicted wholesale price inflation (WPI) to remain high for the short term due to rising global commodity prices and the lower base effect.
However, the good news is that this phenomenon is less likely to have any effect on the Reserve Bank of India (RBI) policy on interest rates. On April 7, the RBI left the repo rate untouched at 4 percent. Repo rate is the rate at which the central govt. borrows money from RBI. The inflation touched 5 percent in February, the reason behind this is, that RBI did not want to risk cutting rates as it can push inflation by increasing the money supply in the economy via cheaper loans.
Also, the increase in prices by international companies and traders has caused a spike in prices of goods and services, these signs are not encouraging at all. RBI governor Shakti Kant Das had announced that the apex bank will continue its “accommodative policy” which means that it will consider cutting cut rates if it becomes necessary to inject more money into the system to drive growth.
Jayati Ghosh, economist, and executive secretary of International Development Economics Associates, discussed with the Media that “This rise in prices is coming at a time when employment and livelihoods have collapsed, this is not appreciated”.
Many people who lost their jobs during the pandemic, and even before because of the economic slowdown, have not been able to find a new one. And those who have jobs are mostly working at significantly lower wages while the incomes of most self-employed people are is still at the previous levels of 2019. hence, there should be no doubt that there has been a significant increase in poverty and hunger.
Even before the pandemic struck, consumer retail inflation had crossed the upper tolerated level decided by govt. by six percent in December 2019. India was in a tight situation with inflation higher than the mandate with economic growth falling fast to levels of three percent, a rare low and the pandemic struck after that.
Indian Economy will recover by Q3 in FY22, The World Bank quoted that, Indian economy has bounced back tremendously from the COVID-19 pandemic and nationwide lockdown over the last year, but it is not out of the gloom yet.
World Bank has predicted that the country's real GDP growth for fiscal year 21/22 could range from 7.5 to 12.5 percent in its latest South Asia Economic Focus report released before the IMF and World bank meet for World Economic Forum 2021.
In April and May, India lashed with the second wave of the coronavirus pandemic with more than 3L daily new cases. Hospitals were under immense pressure due to a lack of medical oxygen and beds.
In mid-May, new coronavirus cases in India hit a record daily high with 4.12L new infections. The situation is getting better in India as daily new cases are below 1 lakh and recoveries outnumber new cases daily. More likely, the vaccination pace will pick up soon.
The second wave is predicted to wane out by the end of July. Govt. of India is aiming to curb the third wave to create minimal damage to the nation. They aim to reduce the chances of lockdown and restore the supply chains. Only by then, we can just hope that inflation and rising prices reduce to keep the pressure out of the pockets.
Also, IMD has predicted a better monsoon this year. This means the pricing may reduce or gets a little toned up helping Inflation to reduce. what will happen, only time will tell.
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