Decline in Inflation, but too early to cheer

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Price rise is what scares the common man. Nothing pleases him better than news that inflation is under control. Of course, it is too early to party as he will have to wait for a few more months to know if the price curve slants up or down or just straightens. However, this does not detract from the little happiness that the latest National Statistical Office (NSO) figures have brought forth. The Consumer Price Index-based inflation declined for the second consecutive month to 5.88% in November from 6.77% in October. Why the figure brings cheer is because the Reserve Bank considers 6% as the threshold for it to make changes in the repo rate, which stands at 6.25% as per the Dec 7, 2022, update, when the bank raised the rate by 35 basis points.

 

In the common man’s language, inflation below 6% is considered normal. Now, the question is whether the fall in inflation rate will taper off in the coming months or continue to 4.91%, as was the case in November 2021. An analysis of the NSO figures shows that one of the reasons for the fall in inflation is the sudden flooding of the market with seasonal vegetables and fruits. Certain products like clothes and footwear also became cheaper, but the growing prices of grains and pulses are a matter of concern. Much also depends on if the Ukraine war takes a turn for the better or the worse. Needless to say, it is one of the primary causes of global inflation today. It’s a different matter that a certain level of inflation acts as a booster for industry and commerce. All the same, it is too early to party.

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