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Increasing Price Pressure

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September 16, 2021

Why in news?

The latest retail inflation data suggests that the inflation for August has slowed for a second straight month to a 5.3% pace after July’s 5.59%.

What is the current price trend?

  • Edible oils have been on a rise for months and the August  print was 33% after July’s 32.5%.
  • Inflation in two vital protein sources, eggs and pulses, also continued to remain a cause for concern.
  • The pace of inflation in fuel and light, clothing and footwear, health as well as household goods and services all rose up last month.
  • Transport and communication  which includes pump prices of automotive fuels of petrol and diesel, stayed stuck in double digits at 10.2%.
  • A wider deflation in vegetable prices was the main positive contributor in easing the overall food and beverages inflation last month.

What does this imply?

  • Price trends among the constituents of CPI  and WPI -based inflation show that it would be premature to drop the guard on price gains
  • Recent CII poll of CEOs showed a majority 67% expect average retail inflation this year to near or exceed the RBI’s upper threshold of 6%
  • So, cutting the fuel taxes is a sure-shot way to address a major component of price pressure

 

Source: The Hindu

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