17 Sep 2022 Inflation and its effect on economically weaker sections.
Sources: The Hindu; Economic Times
News: Accelerating price gains or high retail inflation remains the single biggest challenge to policymakers.
Definition of Inflation from International Monetary fund: Inflation is the rate of increase in prices over a given period of time.
Recent retail inflation data published by National Statistical Office
- Acceleration in Consumer Price Index (CPI) inflation in August to 7%, from 6.7% in July.
- The disproportionately higher burden on rural consumers compared to urban consumers: In urban areas, month-on-month changes in both food prices and overall inflation is 0.50% and 0.46% while in rural areas inflation is at 0.88% and 0.57% respectively.
- Inflation in the prices of cereals surged to 9.57% in August from a 6.9% rate.
- Sequential price upticks of CPI in eight of the 12 food items contributed to the faster inflation: Inflation in the food and beverages category with vegetables having 13.2% year-on-year and 2.5% month-on-month inflation and dairy 6.39% and 0.9%, respectively.
- The future outlook for inflation is not reassuring as rice sowing in the Kharif season is less than last year’s acreage due to uneven distribution of rainfall.
- The recent imposition of tariffs and curbs on the export of non-Basmati rice by the center made inflation in the ‘heavyweight’ food category far from reassuring.
- Gradual revival of demand in services categories including housing, health, education, recreation, and personal care led to increasing price gains.
Government‘s steps to curb inflation:
- An excise tax cut of Rs 8 per litre on petrol and Rs 6 per litre on diesel by the government.
- Reduction in state taxes by Kerala, Rajasthan, and Maharashtra to bring down logistics costs for the industry.
- Import duty reduction of key raw materials of steel and plastic industry.
- Further, the imposition of export duty on some steel products.
- Duty-free imports of 20 lakh tonnes of crude soybean & sunflower oil for the current and next financial year.
- Benefitting around nine crore beneficiaries through the Rs 200 per cylinder subsidy grant.
- Maintaining adequate stock of sugar by putting a limit of 100 lakh tonnes on sugar exports
- To maintain food security and cool prices, a ban on wheat exports slapped.
- Provision of an additional fertilizer subsidy of Rs 1.1 lakh crore to farmers in the current fiscal budget.
- In response to the Centre’s steps prices had begun to ease in items such as oils, fats, and pulses. Ministry of Finance also asserts that there is a moderate increase in headline inflation.
Conclusion: Inflation is considered a tax on the poor as it disproportionately affects the economically weaker sections. Since the poor have no hedge against inflation containing the build-up of price pressures is the best anti-poverty program. Some segments of the economy are witnessing the revival but there is concern that price rise may dampen consumption.
Short Summary:
- Currently, every major or minor economy is facing high inflation due to uncertainties prevailing over the world. Although inflation in India is less compared to developed countries like the USA and European nations. But inflation’s impact on the Indian economy and population is disproportionate due to the largely poor population and less per capita income. So, Indian policymakers are taking steps to curb the prices witnessing mixed results. Now, the sharp slide in global crude prices also came to the rescue of policymakers.
Articles:
- The Hindu: Tax on the poor: On Inflation
- Economic Times: Ten steps the government has taken recently to cool prices
Article Links:
1.https://www.thehindu.com/opinion/editorial/tax-on-the-poor-the-hindu-editorial-on-inflation-affecting-weaker-sections-more/article65890376.ece
2.https://economictimes.indiatimes.com/news/economy/policy/ten-steps-the-government-has-taken-recently-to-cool-prices/articleshow/91788429.cms?from=mdr
Yojna IAS Daily current affairs eng med 17th Sep
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