New Delhi: India’s core inflation (excluding food and fuel) rose to 7.4% during April, indicating continued price pressures outside the food and fuel segments. Rigorous inflation resulting from high food and fuel prices has emerged as a significant policy challenge for policymakers around the world, prompting central banks to raise interest rates.
A jump in global commodity prices and an export ban on palm oil by Indonesia have also added to the problem domestically. China’s strict no-Covid policy has also hurt global supplies, adding to price pressure. “We expect the RBI to increase repo rates by 75-100 basis points for the rest of this fiscal, which means rising cost of borrowing across all instruments. This move may not reduce food or fuel inflation. But checking its normalization could help curb the effects of the second round, according to a report by rating agency Crisil.
There is also a belief that some development may have to be abandoned in the fight against inflation.
A jump in global commodity prices and an export ban on palm oil by Indonesia have also added to the problem domestically. China’s strict no-Covid policy has also hurt global supplies, adding to price pressure. “We expect the RBI to increase repo rates by 75-100 basis points for the rest of this fiscal, which means rising cost of borrowing across all instruments. This move may not reduce food or fuel inflation. But checking its normalization could help curb the effects of the second round, according to a report by rating agency Crisil.
There is also a belief that some development may have to be abandoned in the fight against inflation.
Separate data showed the index of industrial production growth rose 1.9% in March, higher than the revised 1.5% growth in February, but lower than the 24.2% expansion in April 2021. The manufacturing sector grew by 0.9% during the month, while mining grew by 4% and electricity by 6.1%. The manufacturing sector has been badly hit by rising global commodity prices and supply chain disruptions.
Capital goods, a key gauge of investment, rose 0.7% compared to 50.4% in the year-ago period, highlighting the muted pace of investment in the sector. Consumer durables and non-durables both contracted during the month, indicating that consumption has yet to pick up due to inflationary headwinds.