Inflation increased trouble

Due to petroleum goods, commodity and low base effect, the wholesale rate went up to 12.94 percent and retail inflation to 6.30 percent in May, which is the highest in the last 6 months. This is higher than the Reserve Bank’s (RBI) target of 2-6 per cent. This is bad news as it will put pressure on the RBI to hike interest rates. It is another matter that he will not do so because the real concern is to increase GDP growth. Growth remains weak due to the lockdown due to the Corona epidemic and reduced demand. On the other hand, economic activity is picking up in China, America and other rich countries, which will further increase the prices of crude oil and other commodities. That is, it will not be easy for the RBI to strike a balance between growth and inflation. Higher commodity prices will also have a negative impact on industries as the cost of raw materials for them will increase. This will make the manufactured goods more expensive. This is called core inflation. This does not include the inflation rate of petroleum-goods petroleum goods and food. In May it was the highest in the last 83 months. This means that companies are passing on the burden of increased raw material cost to the customers. The Center for Monitoring Indian Economy (CMIE) analyzed the results of 1,481 companies in the January-March quarter and found that they have made a profit of Rs 1.8 lakh crore. The main reason for this is the increase in their profit margins. They are getting this margin by increasing the price of the goods. This cannot be considered healthy because the demand for goods and services has decreased due to the closure of industries or low production due to the epidemic, increasing unemployment on a large scale and falling wages. Not only is the bad news for ordinary customers. In the retail inflation rate, food inflation stood at 5.01 per cent in May, from only 1.96 per cent in the previous month. In this, the price of edible oil and pulses is a major contributor. The poor are being hurt the most due to the inflation of petrol, diesel and LPG along with food items. This leaves them with less money to spend on other needs. If this situation continues, it will further reduce consumption, which will have a bad effect on growth. If the Center and the states want, they can give immediate relief to the people from inflation by reducing the tax on petroleum goods. 61 percent of the price of petrol and 54 percent of diesel goes towards tax. This will give relief to the people, businessmen and the Reserve Bank, the loan will remain cheap, consumption will be strengthened. Along with this, the Center should also consider bringing a relief package to speed up economic activities.