The latest official data on inflation suggest that the industrial output is declining with a meagre 1.4% growth in November. the more worrying part is that the inflation is re-emerging as a threat as in December the retail prices surged to a five-month high of 5.6% from 4.9% in November. The rate of inflation faced in urban part of India was a record high over 5.8% whereas the inflation faced by rural consumers was at 5.36% the steepest pace since July 2021.
India, in its Monetary policy has kept a target of maintaining inflation rate between 4% to 6%. Haryana and TamilNadu along with 4 other state record the inflation rates of more than 6% while another half a dozen States clocked higher inflation than the headline 5.6% level.
Low based effect has pushed up Consumer Price Index inflation in food and beverages and and higher clothing and footwear prices. Inflation in wholesale prices in December decline from a record high of 14.2% in November. Experts are of opinion that the persistent gap between wholesale and retail inflation, now at eight percentage points, does not augur well for price stability ahead.
At Present retail fuel prices have remained static, but this appears to be temporary due to upcoming elections. Yields on government bonds had hit a two-year high which could upset the fiscal math over time. Producers are coping with high commodity prices and input costs will have to find ways to pass them on to consumers which will lead to increase in the retail inflation and squeezing household budgets further.