India’s inflation and temperature levels are soaring high, affecting the poor and middle class the most. In contrast, the rich continue to be unaffected as they shelter under air-conditioners and affluence. India’s retail inflation es- estimated in applying the Consumer Price Index (CPI) has unprecedentedly increased to 7.79% in April since 2014, according to sources in the Ministry of Statistics and Program Implementation, Government of India, whereas India’s average mean and maximum levels of temperature in April have increased to 31.35°C and 35.30°C, respectively, as per records of the India Meteorological Department. The onslaught of both on the poor is terrible, making them more vulnerable. But nature may show mercy on the poor by easing the temperature during the coming southwest monsoon, but the high inflation or general price rise has become the new normal for 50-crore poor people of India for the past few years. As per the OPHI (Oxford Poverty and Human Development Initiative) and UNDP Global Multidimensional Poverty Index 2021, about 22.5 percent of the Indians are extremely poor and they struggle for survival with less than $2 per day.
Further, multi-dimensional poverty in terms of health, education, and standard of living is much lower than income poverty. In recent times, more Indians have been pushed into the absolute poverty trap due to the onslaught of Covid-19, joblessness, and high inflation. Both the retail and wholesale inflation measured in Consumer Price Index (CPI) and Wholesale Price Index (WPI) are on the rise consecutively for the past several months. The CPI inflation is steadily increasing from 6.01% in January, 6.07% in February, 6.95% in March, and 7.79% in April 2022.
The WPI inflation is also constantly on the rise from 13.68% in January to 14.55% in March as per sources in the Ministry of Commerce and Industry. Even though the Russia-Ukraine war has exacerbated global inflation in recent times, inflation in India existed much before the war due to rising fuel and food prices and the government’s price stabilization policy has yielded no result. India’s rural poor have borne the burden of price rise as consumer food prices in rural ar- eas have increased from 3.94% in March 2021 to 7.66% in 2022. Among the food basket of CPI, the price rise in oils and fats is about 24.3% while fuel, light, transportation, and communication are 11%. Even though the crude oil prices in the international market have increased to $110 per barrel, the Central and State taxes on fuel constitute 55% and 50% on petrol and diesel, respectively, and are still high in domestic markets.
The high food and fuel inflation rates are mainly responsible for pushing the cost of input and output prices which resulted in an increase in wholesale inflation. Core inflation which excludes seasonal variation in food and energy costs has crossed the official limits and the monetary policies may fail to yield quick results under this condition. Further, monetary policy alone does not guarantee the arrest of retail inflation unless the government takes the burden by reducing the general prices by reducing the tax on fuel and easing the food prices by imports. In fact, monetary policy may succeed in bringing down wholesale inflation when compared to retail inflation but at the cost of economic activities. The hike in repo rate by the Reserve Bank of India, from 4% to 4.4% basis points, reduces economic activities with an increase in bank interest rates for borrowers rather than bringing down the retail prices.
The increase in the repo rate will slow down India’s economic growth. World Bank president David Malpass in his address on ‘Challenges to growth, security, and stability observed that “inflation continues to accelerate, reducing the real incomes of households around the world, especially the poor. For every one percentage point in- crease in food prices, 10 million people are expected to fall into extreme poverty. The rich can suddenly afford expensive staples, but the poor cannot. Malnutrition is expected to grow and its effects will be the hardest to reverse in children.” India’s 50-crore poor comprising socially and economically weaker sections in rural areas and urban slums are pushed to acute poverty under the effect of inflation. The declining wage rates, Covid-19, and high rural unemployment.
