india

Inflation conundrum

High price rise trends could continue in 2022, compounding the challenge for policy makers

Inflation in wholesale prices offered little comfort in December even as it came off a record high of 14.2% in November to touch 13.6%, staying above double digits for the ninth successive month. Economists believe that the persistent gap between wholesale and retail inflation, now at eight percentage points, does not augur well for price stability ahead. Producers coping with high commodity prices and input costs will have to find ways to pass them on to consumers, feeding into retail inflation and squeezing household budgets further. For industry, inflation is as critical an obstacle to higher consumption and growth impulses as the new virus mutations and the third wave — which by itself is expected to further stoke retail prices. Consistently high inflation, as witnessed since the pandemic onset, constitutes not just a tax on the poor and the middle classes, but is also a potentially permanent wrecking ball for future spending capacity (and growth) amid a damaged job market. The Government, through its statement of intent in the Budget, and the RBI, which has noted that the waning of inflation spiralling across geographies may ‘take longer’ than expected and will review its monetary policy stance next month, need to communicate their inflation game plan to soothe expectations.

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