Peculiar nature of Indian inflation calls for a fiscal response
SummaryIndia’s distinct price drivers mean we should take a broader approach crafted to suit our situation
After showing signs of moderation in July, India’s inflation estimates for August have again moved upwards. While overall inflation measured by the consumer price index (CPI) was 7%, wholesale price index (WPI)-based inflation remained above 10% for the 17th month. In both, it was food inflation driven, with inflation in cereals in double digits. For the CPI, among the three major cereals, rice inflation was 7% compared to a negative reading the same month last year. But the other two major cereals of wheat and maize recorded inflation at more than 10%. In the case of WPI, wheat inflation was 17.4%, the highest since at least 2012, and for maize it was at 25.3%. These confirm fears that our inflation pressures aren’t transitory and are likely to persist longer than expected.