Retail prices of almost all everyday products and services — from food to footwear and movie tickets to medicines — surged in May, data on Monday showed, signalling the government’s inability to control household inflation, partly stoked by a falling rupee.
Rising prices and sliding growth remain key worries for the government strung in a by a heavy debt burden.
The devil of the fresh price indices lay in its detail.
On a year-on-year basis, vegetable prices clocked the sharpest rise at 26.59%, while that of milk and allied products shot up 13.74%. Oil and fats rose 18.42%. Non-alcoholic beverages — like your can of Coke — rose 9.54%.
Prepared meals’ prices — a proxy for restaurant rates — rose 8.64%, partly because the government hiked service taxes and soaring vegetable prices.
Paan and tobacco prices rose 10.17%, while healthcare expenses overall accelerated 6.7%. Even prices of personal care products such as deodorants and lipsticks went up 7.1%.
Surging food costs have shrunk household incomes, as consumers have to pay more for the same goods. Such high inflation has meant average middle-income Indians are making expenditure adjustments to keep their budgets on track.
High prices may have prompted the Reserve Bank of Indi (RBI) to maintain a status quo on interest rates on Monday.
“The RBI appears to be giving more weight to high CPI inflation, which in turn also fashions household inflation expectations,” said Rajeev Malik, senior economist, CLSA.
A falling rupee has only helped in fanning inflation.
The rupee’s falling value — which on Monday again breached the 56-to-a-dollar mark before closing 53 paise down at a more than two-week low of 55.93 — has made imports costlier. This has pushed up prices of many manufactured products that use imported inputs.