Data released by the Reserve Bank of India (RBI) on Friday shows that mean inflationary expectations during April-June inched up from the previous one by 30 basis points for the three-month and one-year periods ahead to 12% and 12.8%, respectively.
RBI surveys inflationary expectations on a quarterly basis. Usually, concerns about food prices are dominant, but this time more than 99% of those surveyed believe prices of non-food items, too, will harden in the year ahead. This number has risen steadily in the past three rounds of the survey. The risk of food price inflation turning into generalized inflation in the months ahead should not be ignored.
The message is clear both for the government and citizens: there is no escaping a period of painful adjustment in which fiscal consolidation leads to lower growth. Unless this is done, inflationary woes will only get prolonged.