With wholesale inflation hitting a 13-month high of 1.26 per cent in April and the mercury poised to peak in the next two months, stubbornly rising food prices are worrying many a family across the nation. This rise was driven as both food and fuel became dearer. Interestingly, India’s retail inflation, measured by the consumer price index (CPI), fell to an 11-month low of 4.83 per cent year-on-year in April 2024, compared to 4.85 the previous month.

The Reserve Bank of India primarily considers retail inflation when formulating monetary policy. However, for the average person, the rise in WPI is concerning as it is primarily influenced by food items, both processed and unprocessed, as well as manufactured goods. India is experiencing an ongoing heatwave, which is expected to affect vegetable prices.

WPI inflation is forecast to increase to 2-3 per cent in May 2024; it is expected to spiral up and reach its peak in June 2024. WPI food inflation, which includes primary food articles and manufactured food items, increased for the third consecutive month to an eight-month high of 5.5 per cent in April (compared to 0.4 per cent in April 2023), driven by both manufactured food products (reaching a 15-month high of 1.2 per cent) and primary food articles (reaching a four-month high of 7.7 per cent).

The increase in WPI inflation in April was attributed mainly to fuel and food items. However, there is a silver lining as the outlook for food inflation has improved due to expectations of a normal monsoon, which is anticipated to boost agricultural production. Additionally, commodity prices have rebounded on hopes of increased demand from China.

Since it is an election year, there is an automatic push to prices based on market speculation and uncertainty over continuation of governance policies, not to mention that the cost of election is recovered from the common man via higher prices. The funding of political parties by corporates and traders often reflects in the spiralling prices, pre- and post-elections. Logistic bottlenecks, labour shortages and increased transportation costs, thanks to oil prices, all contribute to the overall inflationary pressures, amplifying the challenges faced by food producers and consumers alike. Amid the backdrop of escalating food prices, election discussions revolve around economic policies and their impact.

High prices and employment concerns loom large as hot topics, reflecting the broader sentiment of economic anxiety among voters. Generally, the ruling party bears the brunt of inflation as people hold it responsible for not keeping the prices in check. Effectively managing inflation entails employing a comprehensive strategy that harmonises short-term interventions with enduring structural changes. Swift actions, like directed subsidies and mechanisms for stabilising prices, can provide temporary respite to consumers contending with rising food expenses. Until that happens, we can happily fulfil our tax obligations by paying through our nose. Indeed, inflation is taxation without legislation!

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