Disruptions, rising enter costs danger to inflation


Mumbai, May 26

Higher input prices and disruptions to the rural economy have resulted in price pressures and inflation is back to haunt us, a rating agency said on Wednesday. The report by Crisil said it sees upside risks to its 5% estimate on consumer price inflation in FY21 because of this.

It can be noted that the RBI is required to maintain the crucial number at 4% in the medium term, with a 2 percentage point leeway on either side as part of its inflation target. A surge in inflation worries had led it to desist from introducing rate cuts during much of FY21, despite the over 7.6% contraction in the economy.


Crisil report

  • The report said it sees upside risks to its 5% estimate on consumer price inflation in FY21
  • The RBI is required to maintain the crucial number at 4% in the medium term, with a 2 percentage point leeway on either side as part of its inflation target

It said data collection was disrupted in April and May 2020 because of the national lockdown, and last year’s base will not reflect accurate trends. Therefore, it has focused on sequential price trends on a seasonally adjusted basis. “When viewed thus, both WPI (wholesale price index) and CPI indices continued to increase on-month in April 2021,” it said. Input costs are rising because of a surge in global commodities, which are raising manufacturing costs and hence fanning domestic inflation, the report added. — PTI



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