The Consumer Price Index — also called retail inflation — in India shot up to a 17-month high of 6.95 per cent in March 2022. The rise in prices was across the board, including food, footwear, health, transport, recreation and personal care items.
The Reserve Bank of India believes that its trajectory will depend upon the evolving geopolitical situation and its impact on global commodity prices and logistics. The decision of domestic manufacturers to pass on higher fuel costs also contributed to the higher inflation in the country.
Though the inflation remained above six per cent for the last three months, the RBI preferred to support economic growth by restraining itself from increasing interest rates to curb inflationary expectations. Unlike in advanced economies like the United States, the RBI believes that global supply shortages have contributed largely to higher commodity prices in India.
Inflation has remained above five per cent in 78 out of 109 Emerging Markets and Developing Economies — largely because of higher prices of imported goods caused by currency depreciation, global shortages and supply chain issues.
Inflation has also remained above five per cent in 15 of the 34 advanced economies, which includes the United States and the United Kingdom. The United States recorded 40-year-high inflation of 7.9 per cent in March. However, unlike developing economies, the advanced economies are hit by excess liquidity infused by their central banks to fight the Covid-induced slowdown.
Though inflation is likely to technically cool down in the months to come because of the base effect, the world is unlikely to see any drop in prices in the wake of the ongoing geopolitical turmoil in Europe and its ripple effect on crude oil prices and muted movement of money across the world due to lesser risk-appetite among investors. The world must, therefore, learn to live with elevated prices.
