At present, the Indian economy is gripped by unprecedented inflation. The annual inflation rate in India increased to 7.79% in April of 2022, the highest since May of 2014. Food inflation accelerated for the 7th straight month to 8.38%, a new high since November of 2020, with cost of oils and fats (17.28%), vegetables (15.41%) and spices (10.56%) recording the biggest rises. The inflation stayed above the 2% to 6% tolerance limit of the central bank for the fourth month in a row.
What Is Inflation?
In economics, inflation is a general increase in the prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money. The two main indicators of inflation in India are the Wholesale Price Index (WPI) and the Consumer Price Index (CPI).
Governments generally try to keep inflation within an optimal range that promotes growth without dramatically reducing the purchasing power of the currency. There are many methods used to control inflation and, while none are sure bets, some have been more effective and inflicted less collateral damage than others.
The government responded to high inflation in the economy by announcing a series of steps to cool prices and cushion the impact on the common man.
The RBI, in an off-cycle policy meet, hiked repo rate by 40 basis points and the CRR by 50 basis points. The RBI Governor Shaktikanta Das has hinted that more rate hikes are due in to tame the surging inflation.
To bring down the prices, the government has taken the following steps:
- The government announced an excise tax cut of Rs 8 per litre on petrol and Rs 6 per litre on diesel.
- The government also reduced the import duty on key raw materials and inputs for the steel and plastic industry.
- The government has levied export duty on some steel products and raised it on iron ore and concentrates. Together with the import duty cut, the price of steel will come down.
- During the current and next financial year, the government has permitted duty-free imports of 20 lakh tonnes of crude soyabean and crude sunflower oil.
- Under the Ujjwala Yojana the government has also granted a Rs 200 per cylinder subsidy (upto 12 cylinders per year).
- The government set a limit of 100 lakh tonnes on sugar exports to ensure that there is adequate stock when the sugar season begins in October to cover three months’ worth of consumption.
- India slapped a ban on wheat exports to maintain food security and cool prices
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