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Even the gods, it seems, are being singed by inflation, if the experience of devotees like Shekhar M Shetty is anything to go by. Faced with the rising prices of nearly everything, one of the expenses the 68-year-old entrepreneur has cut back on are his offerings to the divine. “If I used to spend around Rs 100 a day for puja, now I’ve cut that to Rs 50.”

While he curtails the expenses in his personal life, in his professional avatar as the proprietor of Sri Devi Café near Bengaluru East Railway Station, he plans to increase the rates of some of the items on the menu by Rs 5-10. He knows customers at his eatery — where a plate of idli costs Rs 30 — are price-sensitive. He has little choice. “The price of everything has gone up — from cooking gas to oil, to electricity, to ingredients. I’ll have to increase prices,” says Shetty, who last undertook such a hike over two years ago. His decision is in line with a recent advisory by the Bruhat Bengaluru Hotel Association to restaurants to increase prices by 10% in view of rising costs.

With no quick fix in sight, the current cycle of inflation is likely to be long and grim for Indians, and the belt-tightening that has already begun is likely to intensify.

For two consecutive months, February and March, India’s headline retail inflation breached the upper tolerance level of 6% set by the Reserve Bank of India (RBI). In March, consumer price index (CPI) inflation surged to 6.95%, a 17-month high, up from 6.1% in February. Both the numbers are alarming, as they transgressed the accepted inflation band of 2-6%, and do not augur well for an economy that has just started rebounding after being rammed by the Covid-19 pandemic. On the back of soaring prices of cereals, vegetables, meat and fish, oils and fats, consumer food price inflation too jumped to a 16-month high of 7.7% in March, ringing alarm bells simultaneously in Delhi’s North Block and Mumbai’s Mint Street. India’s wholesale price index-based inflation also jumped to 14.6% in March, from 13.1% in February.

Against this backdrop and, more importantly, almost a week before the inflation numbers for April were expected — likely to be released on May 12 —the RBI stepped in with an unscheduled policy announcement. There were two t a ke aw ay s f r o m R B I G o ve r n o r Shaktikanta Das’ address on the afternoon of May 4. One, the repo rate, meaning the rate at which RBI lends to commercial banks, was raised by 40 basis points, something which analysts expected to happen only next month. Two, the cash reserve ratio (CRR) was hiked by 50 basis points, which will force lenders to set aside more money with the central bank and thus suck out an estimated Rs 87,000 crore liquidity from the system. “As several storms hit together, our actions today are important steps to steady the ship,” said Das, calling himself an “eternal optimist”.


Despite such optimism, RBI can no longer shy away from the global storm which has not spared India and is strong enough to stay longer. Fuel and food inflation have engulfed the world, eating into the savings of people and dampening economic recovery of countries.

In India, a standard gas cylinder of 14.2 kg now costs Rs 1,000 as against Rs 581 on May 1, 2020, a rise of 72% in just two years. Similarly, 1 litre of petrol in Delhi costs Rs 105, a steep rise from Rs 70 two years ago. The Russia-Ukraine war, which began in February and is still raging, is primarily responsible for the spike in energy prices.

DK Srivastava, chief policy advisor of EY India, says the menace of inflation may stay put for almost a year. “Since the domestic inflation in India is driven by global supply-side rigidities and high petroleum prices, it is likely to persist for at least three to four quarters. Supply-side factors usually take much longer before the situation improves,” he says.


It is likely that April’s inflation numbers could be grimmer. RBI itself has given some clues. “High frequency price indicators for April indicate the persistence of food price pressures. Simultaneously, the direct impact of the increases in domestic pump prices of petroleum products — beginning the second fortnight of March — is feeding into core inflation prints and is expected to have intensified in April,” Das said.

The question is, how long will this high inflationary trend persist? International Monetary Fund’s World Economic Outlook, April 2022, has projected India’s retail inflation at 6.1% for 2022-23, higher than what is anticipated for Europe (5.3%) and lower than the estimates for UK (7.4%) and the US (7.7%) — geographies that traditionally witnessed low inflation but are now reeling from extraordinary price pressures. Experts say a spike in commodity prices as well as tightening of the labour market are the primary reasons behind such a reversal. The same report says India’s retail inflation may ease to 4.8% only in 2023-24. (Data for countries barring India pertain to calendar years.)


People are trying different ways to offset their soaring costs, brought about by a perfect storm of factors, from the Russia-Ukraine conflict to supply chain bottlenecks to a ban on palm oil exports from Indonesia. Puja Jaggi and her daughter Shivani, who run home-baking venture Baker Aunty in Delhi’s New Friends Colony, are in a quandary.

“Our vendors have increased the prices of everything — from cashew nuts and almonds to even castor sugar. A cake would cost us `800 to make earlier, and we could sell it for Rs 1,100. But that same cake today costs us Rs 1,100 to make,” says Shivani. “It’s a difficult decision to increase prices because clients will not understand, they somehow expect home bakers to be cheap.” On a personal level, says Shivani, no expensive purchases are on the cards.

A h m e d a b a d – b a s e d B i n u Francis, a 27-year-old tech and marketing consultant, says, “I was planning to buy a new phone, but phones are also getting more expensive due to trade wars and supply chain issues. I replaced the battery of my phone instead and will get a new one after two years.”

From individual households to large conglomerates, a raft of such decisions is being taken. On Tuesday, Coca-Cola India’s president told ET that more price hikes are on the cards, while the heads of companies like HUL and Britannia have also expressed similar sentiments. Nestle, meanwhile, has increased the price of a 70 g pack of Maggi Masala from Rs 12 to Rs 14.

Among the most tangible whammies has been the steady upward march of fuel prices. Francis, for instance, has deferred his decision to buy a car, in the face of the high prices of vehicles and fuel, because it “just does not make sense anymore”.

In Bengaluru, a software engineer in his 30s, who has requested anonymity, too, has postponed his plan to buy a new car this financial quarter due to higher costs and some recent medical expenses. He says that when he does buy, he will probably buy a used car. “That makes more sense economically,” he says.


Economists and analysts don’t see any easy, short-term exit. ICRA chief economist Aditi Nayar says although a higher base will soften the May CPI inflation print considerably, it is likely to remain above 6%, with the rating agency’s projection for April being an “eyewatering” 7.4%. “While a back-to-back hike in the June 2022 policy is not yet certain, we do foresee an additional 35-60 basis points of rate hikes in the remaining half of the current financial year. If a de-escalation in geopolitical tension cools commodity prices, then we expect a pause to reassess the impact on growth, followed by another 25-50 bps of rate hikes in calendar year 2023,” says Nayar.

S&P Global Ratings’ chief economist for Asia-Pacific, Louis Kuijs, says they expect India’s inflation to remain elevated in 2022-23, as higher international commodity prices are adding to existing cost pressures in both industry and agriculture. “As domestic demand recovers, we think these cost pressures will be passed on to retail prices to a greater extent,” says Kuijs.

Along with Shetty of Sri Devi Café, many Indians will have to bear that burden.

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