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Last updated: 15 Nov, 2022  

Inflation.9.Thmb.jpg Gaining ground against inflation

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Bikky Khosla | 15 Nov, 2022

Wholesale inflation fell to a 20-month low of 8.39 percent y-o-y in October, from 13.83 percent in October 2021, while it stood at 10.70 percent in the previous month. Also, this was for the first time that wholesale inflation fell to single digit in 18 months. Similarly, retail inflation also eased to a 3-month low of 6.77 percent in October from 7.41 percent in September. These figures are a relief.

The Finance Ministry claims that India has managed inflation better than most countries, and although it is above RBI’s tolerance level, with the October figures it seems that the situation is improving gradually. Experts point out that India will escape the global inflation trap if global commodity prices ease, and analyzing the October data we find that decreasing commodity prices has contributed significantly to the decrease in retail inflation.

While US inflation is hovering around 8 percent and as per IMF estimate global inflation is likely to rise from 4.7 percent in 2021 to 8.8 percent in 2022, it seems the Indian economy is gradually freeing itself from the impact of global uncertainties. Over the past few months, the RBI has taken several proactive steps to rein in inflation, which, along with several supply side interventions by the Centre, have garnered positive results.

Meanwhile, however, rating agency Moody's Investors Service has cut India's growth forecast to 7.0 percent for 2022 from 7.7 percent. It points out that higher inflation, along with higher interest rates and slowing global growth, will dampen India’s economic momentum “by more than previously expected”. This concern does not seem overblown, and as far as the battle against inflation is concerned, not an iota of doubt that we still have a lot do.

I invite your opinions.
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