Inflation rising due to more than doubling in food prices RBI may drop idea of ​​cutting rates – Business News India

Even before the general budget, the common man’s budget has deteriorated. Food prices are through the roof. Because of this, food prices have more than doubled in the last month of December. According to data published by the National Statistics Office (ONE), food inflation increased to 4.05 percent in December from 1.87 percent in the previous month. Retail inflation also rose sharply in December due to rising food inflation. We tell you that the budget can be presented on February 1st.

Experts say that the Reserve Bank may once again abandon the idea of ​​cutting rates in view of the high level of inflation. According to the Reserve Bank, headline inflation will be at its highest level in the fourth quarter of the current fiscal year. After that, it will go down. Early last week, many economists in the country had forecast retail inflation to exceed 5.50 percent, and retail inflation for December has been close.

Among food items, inflation for cereals and their derivatives, eggs, milk and derivatives, spices and prepared meals, snacks and sweets was higher in December compared to the previous month. However, the rate of inflation in vegetables, fruits, and oils and fats slowed down. Inflation in the fuel and light category moderated in December compared to the previous month, but remained at 10.95 percent. It was 13.35 percent in the month of November.

RBI takes note of retail inflation

The Reserve Bank primarily analyzes retail inflation data in the bi-monthly monetary review. In view of high inflation, RBI has held rates steady in nine consecutive currency reviews. This time, after the budget, there will be a Reserve Bank monetary policy review meeting.

Special fear of rate increase

Economists say the Reserve Bank may also raise interest rates in the middle of the year. Rahul Bajoria, chief economist at Barclays India, said core inflation is higher as rising telecom tariffs and higher energy costs set the stage for possible monetary policy tightening. Now RBI has to seriously look at inflation,” said Upasana Bhardwaj, senior economist at Kotak Mahindra Bank. Core inflation remains very volatile and high and should not be ignored by the RBI.

Industrial production grew 17.4 percent in April-November

Industrial production increased 17.4 percent during April-November in the current fiscal year, while it decreased 15.3 percent in the same period of the previous fiscal year 2020-21. According to data from the Industrial Production Index (IIP) of the National Statistics Office (ONE), industrial production was affected due to the coronavirus epidemic that began in March 2020. At that time it had decreased by 18.7 percent. In April 2020, a decrease of 57.3 percent was registered due to the ‘lockdown’ imposed for the prevention of the epidemic.

Fiscal deficit will be 7.1 percent: ICRA

The ICRA rating agency has estimated that the government’s fiscal deficit will be Rs 16.6 lakh crore in the 2021-22 fiscal year, which will be about 7.1 percent of gross domestic product (GDP). ICRA Ratings said in a report on Wednesday that the states’ fiscal deficit is estimated to be at a relatively low level of 3.3 percent in the current fiscal year. In this way, the general fiscal deficit of the Center and the States can reach around 10.4 percent of GDP.

According to the report, in the upcoming fiscal year 2022-23, the government’s fiscal deficit may be slightly reduced to Rs 15.2 lakh crore, which will be 5.8 percent of GDP. ICRA Chief Economist Aditi Nayar said the government’s gross tax revenue in 2021-22 could exceed the budget estimate by Rs 2.5 lakh crore due to the increase in tax collection. However, after June 2022, the end of the GST compensation system will increase the fiscal deficit of state governments.

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