India needs to be wary of ‘imported inflation’ from high energy prices: Eco Survey

India needs to be wary of imported inflation from elevated energy prices, said the Economic Survey 2021-22.

As per the Survey, which was tabled in Parliament on Monday by Union Finance Minister Nirmala Sitharaman, the average headline Consumer Price Index-Combined (CPI-C) inflation in India moderated to 5.2 per cent in 2021-22 (April-December) from 6.6 per cent in the corresponding period of 2020-21 and was recorded at 5.6 per cent in December 2021.

“The Consumer Price Index inflation remained range bound as food prices eased considerably due to the supply management response by the Government. Food inflation remained benign during the year at 2.9 per cent (April-December) as against 9.1 per cent in the corresponding period last year.

“In the case of vegetables, prices of onions and potatoes remained under control, though retail prices of tomatoes witnessed an uptick during September to November 2021 due to untimely rains in major producing states.”

However, with fresh arrivals in the market in December, retail prices of tomatoes too, are showing signs of easing, it said.

“While seasonality plays a significant role in the case of vegetables, random shocks like untimely rains also have an impact on their availability and prices. A strong network of cold storage chains well supported by effective transport infrastructure is needed to stabilise the prices of such perishable commodities.

“Effective supply-side management kept prices of most essential commodities under control during the year,” it said.

The Survey cited that proactive measures were taken to contain the price rise in pulses and edible oils that reported high inflation reflecting the impact of imported inflation in these commodities. Besides, reduction in central excise and subsequent cuts in VAT by most states has also helped ease petrol and diesel prices.

However, the survey further said that wholesale inflation based on ‘Wholesale Price Index’ (WPI), after remaining very benign during the previous financial year on account of pandemic induced weakening of economic activity, record low global crude oil prices and weak demand, witnessed a sharp uptick, rising to 12.5 per cent during 2021-22 (April-December).

“This was attributable to the pick-up in economic activity, sharp increase in international prices of crude oil and other imported inputs, and high freight costs.”

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