Inflation is a global concern. In the US, prices were up 8.6% from their year-ago levels last month, so sharp it would probably take a policy-induced slowdown to return to its target of an average 2%. India’s data for May, released on Monday, puts our retail inflation at 7.04%, marginally lower than April’s reading of around 7.8%. Given our tolerance limit of 6%, this is less catastrophic than the US, but it should not serve as a fig leaf for central bank failure.
To talk about supply shocks from abroad as the sole cause of the crisis would be to deliberately ignore the inflationary impulses brought on by an unprecedented monetary and fiscal expansion in response to the COVID crisis. Since an extended era of cheap oil was no guarantee to begin with, the Ukraine war can be blamed for turning current risks to a head. Broadly speaking, price stability is a function of the priority we place on it. Remember, inflation is the most merciless deduction, as it acts as a regressive tax. It mostly hurts those who have less to get by. As is the group of its beneficiaries, the result is a reverse redistribution—from the poor to the rich. And since it is unforgivable, we must treat it with the urgency it deserves.