Inflation is still a threat

Why in news?

Union Finance Minister has recently said that India’s inflation battle was a concern but no longer a "red-lettered" word.

What is the inflation status in India?

Consumer inflation shows an 8-year high of 7.8% in April, 2022.
The recent dip in commodity prices further deteriorate the situation.
Though retail inflation of 6.71% in July 2022 was seen as a relief, it still remained above the 6% official tolerance threshold.
Price rise in rural India has also been much sharper, averaging 7.6% in the first four months of 2022-23 and over 7% through 2022 so far.
The overall average consumer inflation remains at 7.14% and 6.79% for the same two time-frames, respectively.
The uneven monsoon so far could further weaken rural demand.
A prolonged spell of high inflation is more deleterious for households’ ability and tendency to spend.
It dents the demand and growth impulses that may catalyse fresh investments from industry.

Why inflation is still a threat?

It was reported that the Consumer Price Index for August due next week could take inflation closer to 7% again.
It will be partly because of food price rise, that accounts for 45% of the CPI and had dipped to a 5-month low in July, may have resurged.
The above data warns that the worst is behind and it is too early to let the guard down.
Inflation may have moderated a bit, but remains a threat that warrants constant vigil.

What are the future aspirations?

The monetary policy tools such as interest rate hikes alone cannot tame inflation.
The union finance minister pushed the RBI to not be ‘as synchronised’ with its developed world counterparts when growth needs to be unrestricted.
The emphasis should be on a multi-pronged approach to contain inflation, including better logistics, fiscal and trade policy moves.
The Government must act expeditiously for a mechanism where the Centre and States work together to tackle price rise.
It would ensure that inflation’s immediate term moderation is durable and it can be re-activated.
Thus, paving way for a quicker, sure-footed and cohesive future policy reactions.

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