Vendors wait for customers at a wholesale vegetable market in Chennai. Photo: AFP / Arun Sankar

Retail inflation in India surged to a 17-month high of 6.95% in March on the back of costlier food items, according to government data. The previous high was recorded in October 2020 (7.61%).

This is much higher than the Reserve Bank of India’s tolerance limit of 4% with a margin of 2% on either side. It was also the third consecutive month of Consumer Price Index-based inflation crossing the 6% mark. Retail inflation in March 2021 was 5.52%.

According to data by the National Statistical Office, food inflation shot up to 7.68% in March 2022, from 5.85% in the preceding month. Food prices contribute nearly half of the consumer price index.

In the same period last year, food inflation was 4.87%. Meat and fish prices recorded 9.63% inflation, up from 7.4% in February. Clothing and footwear inflation touched a combined 9.4%, with footwear alone hitting almost 11.3%.

Fuel inflation moderated to 7.5% from 8.7% in February, as domestic prices of gasoline, diesel and gas were only raised after March 10. Gasoline and diesel rates have increased by more than 10 rupees as global crude prices hardened after Russia invaded Ukraine.

As a ripple effect, producers started passing on higher commodity prices and input costs to consumers across goods and services. Market analysts expect the full impact of the heightened fuel prices to be visible in April.

While announcing the bi-monthly monetary policy last week, the Reserve Bank of India raised the retail inflation projection for the current fiscal year to 5.7%, from an earlier forecast of 4.5%.

The central bank said that given the excessive volatility in global crude oil prices since late February and the uncertainty over geopolitical tensions, any projection of growth and inflation is fraught with risk. It is largely contingent upon future oil and commodity price developments.

The Reserve Bank had kept interest rates low and it has remained unchanged for the last two years. Its earlier stance was to focus on growth, and inflation was considered transitory.

But in the last meeting, it conceded that inflation needed to be brought under control. Analysts feel that if inflation continues to remain high in April, the central bank may consider raising interest rates.

Households struggle

Meanwhile, a survey has shown that about nine out of every 10 households in India are “feeling the pinch” of rising prices of vegetables in the last 30 days. Marketing firm LocalCircles conducted a countrywide survey covering 311 districts and claimed that about 87% of Indian households have been “affected” by the rising prices of vegetables since March.

The sharp rise in the prices of edible oils such as sunflower oil, peanut oil, canola oil, sesame oil, coconut oil, mustard oil and palm oil, which are primarily used for cooking, has forced many households to either cut down on consumption or use the same amount after reducing other discretionary expenditure.