Business concentration may pose inflation risks2 min read 26 Mar 2023, 09:55 PM IST
Viral Acharya has flagged a plausible problem of pricing power wielded by India’s ‘big five’ groups but our inflation-targeting central bank must go by its regular monetarist toolkit
Sticky core inflation is a bugbear for policymakers trying to contain price escalation. As a measure that leaves out volatile fuel and food, its recent obstinacy in India—it was above 6% last month—has dampened hopes of relief raised by global oil and wheat moderation after last year’s war spike. The core typically heats up once an upshoot is no longer seen as a blip and prices get raised all around. But is there another factor at work that’s peculiar to India’ economy? Viral Acharya, former deputy governor of the Reserve Bank of India (RBI), argued some days ago that a concentration of economic heft may have enhanced the pricing power of a few private companies and queered the pitch for price stability. As low levels of rivalry tend to spell higher retail charges in theory as well as practice, his argument merits a closer look.