Union Finance Minister Nirmala Sitharaman assured the Lok Sabha on Monday that India's retail inflation has finally cooled down, settling comfortably within the Reserve Bank of India's (RBI) tolerance band of 2% to 6%. This statement came as a welcome respite amidst concerns about rising prices fueled by global turmoil and domestic weather woes.
A Steady Descent from Past Peaks
Addressing a starred question from AAP MP Sushil Kumar Rinku on escalating inflation, Sitharaman presented a reassuring picture. She highlighted a significant decline in retail inflation compared to the year-ago period, dropping from an average of 7.1% in April-October 2022 to 5.4% in the same period of 2023. This downward trend further extends to core inflation, which excludes volatile food and fuel items, showcasing a commendable drop from 5.1% in April to 4.3% in October.
Acknowledging occasional inflationary blips due to global disruptions and adverse weather conditions, Sitharaman attributed their resolution to the government's proactive supply-side initiatives and the RBI's effective demand stabilization measures. These collaborative efforts, she emphasized, helped address demand-supply mismatches, ultimately tempering inflationary pressures.
Countering Concerns of a November Surge
Sitharaman's remarks directly addressed recent anxieties triggered by Barclay's estimation of a potential inflation surge above 6% in November, exceeding the RBI's tolerance limit. This apprehension stemmed from October's inflation rate hovering at 4.87%.
Further allaying concerns, Finance Minister Sitharaman acknowledged the near-term risks posed by rising food prices, especially vegetables, as indicated by high-frequency food price indicators. However, she expressed confidence in RBI Governor Shaktikanta Das's projections of inflation remaining below 5% for the entire financial year 2023-24. Das himself, while acknowledging the food inflation risks, highlighted the "significant progress" already made in bringing inflation down to sub-5% levels in October.
Government's Multi-Pronged Approach
Delving into the specific measures taken by the government to curb inflation, Sitharaman listed various initiatives. These included:
Strengthening buffers of key food items and periodic open market releases.
Easing imports of essential food items through trade policy measures.
Preventing hoarding through stock limits and designated retail outlets.
Extending the Pradhan Mantri Garib Kalyan Anna Yojana (free food grains to 81.35 crore beneficiaries) for five years from January 1, 2024.
Increasing the subsidy under the Pradhan Mantri Ujjwala Yojana from Rs 200 to Rs 300 per 14.2 kg cylinder.
While the recent reduction in LPG cylinder prices aimed at easing the burden on women was initially hailed as a relief measure, it ultimately highlighted the inflation challenge and the price increases witnessed over the past three years. Nevertheless, Sitharaman's statement and the RBI's projected inflation trajectory offer a reassuring glimpse into the country's efforts to navigate the delicate dance between rising global prices and domestic economic stability.
By continuing to focus on both short-term demand-supply mismatches and long-term food security initiatives, India seeks to keep inflation within manageable limits and foster growth in the face of global headwinds.