Chief Economic Adviser KV Subramanian believes that as soon as there is relief in the lockdown, the food inflation rate will come down. Retail inflation had crossed the 6 per cent mark in May.
Retail inflation hit a six-month high of 6.3 per cent in May.
Chief Economic Adviser KV Subramaniam says that food inflation is likely to come down in the coming days due to a pick-up in economic activity after the lockdown opens and a good monsoon. He said that due to the lockdown imposed in many states during April-May this year to deal with the second wave of COVID-19, the prices of food items have increased.
Subramaniam said the high rate of food inflation has not affected a large section of the population as they are being given free ration under the Pradhan Mantri Garib Kalyan Yojana. Subramaniam said, “The recent increase in food inflation is due to restrictions imposed in the past… We have also seen this last year when the lockdown was imposed and after that the supply situation got affected and food inflation was affected. Which reflected its impact on the retail price index based inflation.
Relief in lockdown will reduce inflation
“That’s why I believe it (lockdown) has contributed and now that many restrictions are being removed, I believe food inflation will moderate.” Retail inflation for the month of May stood at the Reserve Bank’s satisfactory 6 per cent. exceeded the range. This increased the pressure on both the central bank and the government to bring down food prices. The government had earlier this month reduced the import duty value of edible oils by up to $112 a tonne.
Monsoon will also bring down inflation
Subramaniam said that with the easing of restrictions, a good monsoon will also have a favorable impact on food prices. Asked about the impact of rising petrol and diesel prices on retail inflation, he said it would not have any major impact as the fuel and light segment only weigh 7.94 per cent in consumer price index (CPI)-based inflation. “The overall impact will not be high, but if you look at the contribution of petrol and diesel prices, and especially diesel prices to transportation costs, the impact on food inflation and transportation of other commodities will be commensurate with the initial impact. .”
Retail inflation hits 6.3 percent in May
Retail inflation rose to a six-month high of 6.3 per cent in May on rising prices of edible oils and protein-rich items. The government has asked the Reserve Bank to keep retail inflation at 4 per cent. In this it can go down by two percent or up to two percent. Retail price index (CPI)-based inflation rose from 4.23 per cent in April to a six-month high of 6.23 per cent in May. At the same time, food inflation increased from 1.96 percent to 5.01 percent in May during this period. Earlier, retail inflation had gone up to 6.93 percent in November 2020.
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