Just four days after RBI announced that it would prioritize inflation over growth, official data leaves retail inflation restless Rapidly rose to a 17-month high of 6.95% in March, The upward movement in prices appears to have alarmed most economists as well. The latest survey by RBI’s Professional Forecasters, released last week, showed that the 33 panellists polled had averaged fourth quarter inflation expectations for March CPI inflation which was 73 basis points lower at 6.22%. The jump was largely driven by food prices, which account for 46% of the weight of the Consumer Price Index at the food and beverage group level. While inflation in food and beverages rose 154 basis points from the previous month’s pace to an annualized rate of 7.47%, month-on-month inflation was also significant at 1.3%. Oil and fat prices rose 18.8% year-over-year and 5.3% sequentially. Even considering that the war in Ukraine has severely hampered imports of sunflower oil and forced edible oil importers to seek alternative supplies at a premium, it is a food item. Which is seeing price pressure for a long time. It performs poorly on the government’s efforts to proactively address supply-related issues. Meat and fish prices also showed a sharp increase at 9.63% annualized and 5% sequentially. RBI Governor Shaktikanta Das clearly marked the impact of the war on the cost of feed and warned that the “impact on poultry, milk and dairy prices” of the global supply crunch could continue.
Consumers in remote areas, where a large proportion of the poor live, have been hit hardest, with rural inflation rising 71 basis points to 7.66%. Food price inflation for rural buyers, as measured by the Consumer Food Price Index, rose to over 8.04% from a level of 8.0%, pointing to increasing uncertainty and nutritional vulnerability in rural areas. Most disappointingly, March inflation barely factors into the pass-through effect of the ongoing hike in pump prices of petrol and diesel, as state-run refiners started raising prices from March 22 itself. Growth in production of industrial goods to reflect the increase in fuel costs along with road freight rates for transporting everything from farmland may seem relatively low in comparison, given the 8% inflation seen in the transportation and communications subgroup . Two other RBI surveys on inflation expectations and consumer confidence of households also raise cautionary flags. While the first shows three-month and one-year forward expectations rose to 10.7% and 10.8%, respectively, from the previous round, the latter pointed to consumer confidence remaining negative, despite sentiment improving. Notably, one year ahead expectations on inflation show that around 84% of consumers see accelerating price gains and the majority expect to spend more on essentials than on non-essentials. It is time for policy makers to control inflation before it further decelerates consumption and growth.