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Elevated levels of pulses inflation are among the pressure points.bloomberg
Elevated levels of pulses inflation are among the pressure points.bloomberg

Inflation fears rise in households: RBI poll

  • The central bank’s rate-setting committee believes that the supply shock to food prices in April may persist over the next few months
  • India’s economic growth slumped to 3.1% in the March quarter, the slowest pace in 11 years

More Indians expect retail inflation to accelerate in the near future than they did in March, according to a survey of households by the Reserve Bank of India.

The Households’ Inflation Expectations Survey for May conducted among 5,761 households showed that 85.3% households expect inflation to accelerate in the next three months. That compares with 83.3% in March. However, fewer households, 85.6% of those surveyed, now expect inflation to quicken in the year ahead against 86.3% households in May last year.

“Three-month and one-year ahead median inflation expectations rose by 190 and 120 basis points, respectively, over the previous round," RBI said in the survey released on Thursday.

Retail inflation, calculated on the basis of Consumer Price Index (CPI), was revised to 5.84% in March from a provisional 5.91%, continuing to remain above the central bank’s medium-term goal of 4% for the sixth month in a row.

The monetary policy committee (MPC) expects headline inflation to remain firm in the first half of the fiscal year 2020-21, but should ease in the second half, aided by favourable base effects. In the second half of the current fiscal, the MPC expects headline inflation to slow to less than 4%.

The central bank’s rate-setting committee believes that the supply shock to food prices in April may persist over the next few months, depending on the state of lockdown and the time taken to restore the supply chains once curbs are lifted.

Among the pressure points, Das said, are elevated levels of pulses inflation and it warrants timely and swift supply-side interventions, including a reappraisal of import duties.

Consumer sentiment, on the other hand, touched a historic low with the current situation index falling to 63.7% in May from 85.6% in March, according to RBI’s consumer confidence survey.

“Consumer perception on the general economic situation, employment scenario and household income plunged deeper into contraction zone, while expectation on general economic situation and employment scenario for the year ahead were also pessimistic," the central bank said in the survey.

While overall consumer spending remained afloat, mostly due to relative inelasticity in essential spending, consumers reported sharp cuts in discretionary spending. They do not expect much improvement in the coming year, it said.

The central bank conducted the survey through telephonic interviews across 5,300 households in the 18 major cities of Ahmedabad, Bengaluru, Bhopal, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Kolkata, Lucknow, Mumbai, Patna and Thiruvananthapuram.

These households were asked about general perceptions and expectations on the general economic situation, employment scenario, overall price situation and own income and spending.

India’s economic growth slumped to 3.1% in the March quarter, the slowest pace in 11 years, even as fresh data suggested the economy may be headed for a major shock in the June quarter.

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