The prices of all the essential items including vegetables and grocery items in the country have increased little by little and are now at their peak.
As prices continue to rise, people are now starting to feel the impact.
Already, the industry has been hit hard in the last two and a half years due to the spread of the Corona virus. The impact of this was reflected in the reduction of salaries of the employees. Not only that, thousands faced unemployment. Many who migrated to other states for employment, returned to their hometowns. Many of them are not re-employed. Others have looked for work locally because they think the pay is low and they can be with their families.
As the prices of goods in the country continued to rise, inflation was on the rise. Notably, it was slightly higher than the Reserve Bank’s target rate of 7.5%. Inflation had peaked at 7.8% in April last year. In this case, it decreased slightly in subsequent months.
Inflation was 7.01% in June. The first quarter average was 7.3%. This was lower than the RBI’s estimate of 7.5%. Thus, it can be said that the Central Reserve Bank has an opportunity to heave a sigh of relief.
Except for housing, inflation in all other segments is above 6%. Also, inflation, which includes vegetables, foodstuff and soft drinks, has seen a disturbing increase to 17.4%. This does not give any comfort to the RBI’s monetary policy.
In this scenario, market sources predict that the Reserve Bank of India will hike the interest rate by 25 basis points to 50 basis points, i.e. 0.25% to 0.50%. Also, a further 25 basis points or 0.25% hike is likely later this fiscal.
Knowing the burden of the people, the Central Reserve Bank is taking various measures to ensure that the common man should not be affected by the interest rates. Hence, interest rate fluctuations are not expected to be a long tight cycle.
Meanwhile, inflation in the US has recently peaked. In June, price volatility in the world powerhouse US hit a 40-year low of 9.1%. As a result, the US central bank, the Federal Reserve, was forced to take aggressive, tightening policy decisions to control inflation.
It is in this situation that the prices of essential commodities are witnessing a slight decline in the global level through statistical data. If prices of these commodities fall further, the prospects for the current tightening cycle ending sooner than expected are bright.
Amid recession fears, if global commodity prices ease slightly, the inflationary pressures on the Indian economy will surely ease. But, the Indian rupee’s value against the US dollar is greatly decreasing, which is seen as a matter of concern among economists. Last week, the rupee against the dollar stood at Rs. It touched a new low of 80. Market experts believe that the rupee may be further affected as foreign investors follow the dollar.
In this situation, due to the outbreak of piracy in neighboring China, which has a strong economy, a general shutdown has been declared and enforced in some provinces. This could intensify import-linked inflation. It is feared that the impact will have a significant impact on the country’s economy.
Experts have warned that there is a need to be vigilant about supply chain disruptions. Considering the exponential growth of the Indian economy, policy needs to be devised in ways that are acceptable to all parties to increase delivery capacity.
The RBI needs to assess the growth-inflation impact before taking any tighter decisions on monetary policy. It should also ensure that its activities do not cause significant economic impact. The Central Reserve Bank should take policy decisions that will not cause hardship to the poor and poor people to control inflation.
It is very important at this time to take policy decisions in such a way that people are not affected by the prices in any way.