Even as inflation seems to be going out of control despite tough measures taken by the Government, global research company Crisil on Tuesday revealed that skyrocketing prices caused Indian households to incur additional expenses to the tune of a whopping Rs. 5.8 lakh crore during the last three years.
In a study titled “Inflation Hurts”, Crisil stated that rise in inflation to 8 per cent per during 2008-09 to 2010-11, from 5 per cent in the preceding three years eroded the purchasing power of money and inflated the consumption expenditure bill of Indian households by Rs 5.8 lakh crore.
Crisil said inflation was not uniform and food items saw a sharper price hike, compared to non-food items during the three-year period. “Food inflation was at 11.6 per cent during 2008-09 to 2010-11 as compared to non-food inflation of 5.7 per cent,’’ the study stated.
Headline inflation, which includes both food and non-food primary articles, besides manufactured items, has been above the 8 per cent mark since January 2010. It was 9.06 per cent for May this year.
The Reserve Bank of India (RBI) has hiked its key-policy rates ten times since March 2010 to curb demand and tame inflation. In its annual monetary policy for 2011-12, RBI said that inflationary pressure is likely to continue during the first half of the current fiscal on account of high global commodity prices, particularly crude. The apex bank had exuded confidence that the pressure from high food prices would moderate in the days to come.
However, after a brief period of moderation, food inflation started surging again and stood at 9.13 per cent for the week ended June 11. “The surge in inflation was initially driven by supply shocks such as a rise in food and fuel prices, which then spread to manufacturing goods as well,’’ Crisil said.
Headline inflation for the whole of 2010-11 averaged 9.6 per cent as compared to a mere 3.8 per cent during the previous fiscal.
The study said that growth of private consumption expenditure in nominal terms increased to nearly 17 per cent per year during 2008-09 to 2010-11, as against 14 per cent in the preceding three years mainly due to rise in food inflation.
The price trends of commodities in the Wholesale Price Index favour the middle and higher income classes, rather than poor and vulnerable Indian households who spend large part of their income on food. Crisil said that food inflation is likely to remain high in the near future due to structural and supply side issues. “Higher food prices should be an incentive to enhance production of food items, but this has not happened so far. In addition to price signals, productivity improvement in food/agriculture categories would require better technology and improved investments in irrigation. In the absence of these measures, high food inflation is here to stay,’’ it said.
The study said that inflation in certain food items, especially eggs, meat, fish and milk, has surged to double-digit over the last two years after increasing moderately in the preceding period. “Rise in prices of these items has a greater impact on consumers, as they are purchased frequently and also account for a large share of a household's daily expenditure. Purchases of manufactured goods, especially durables, are not as frequent. Therefore, a decline in prices of these goods often goes unnoticed,” the study added.
source:The Hindu