India’s inflation rate in March 2022 was the highest in 17 months

Published April 12, 2022

India‘s retail inflation surged to 6.95% in March, the highest since October 2020.

The spike in prices was led by food items, according to the country’s Consumer Price Index-based inflation report released today (pdf) (April 12). In the preceding month, the consumer price index-based inflation stood at 6.07%. With this, the inflation has breached the Reserve Bank of India’s (RBI) upper tolerance limit of 6% for the third month in a row.

“Prices of all commodities are on a rise and the outlook is set to worsen amidst disruptions in global supply chains, rising freight costs, and sanctions imposed on Russia,” Arun Singh, global chief economist at Dun and Bradstreet told Quartz.

Worryingly, a continuous rise in fuel prices since March 22 has not been fully captured in the latest data, suggesting that inflation may remain elevated in the coming months, according to Vivek Rathi, director of research at Knight Frank India.

A surge in crude oil prices to a 14-year high has resulted in broad price pressures on Indian households.

Among food items, the index for oil and fats recorded the largest sequential price hike, by 5.3% in March. This may raise pressure on the government to make edible oils cheaper.

Inflation reading way above RBI’s revised estimate

The latest inflation data is substantially higher than the RBI’s revised projection of 5.7% for the financial year 2023, assuming crude oil prices at $100 per barrel on average. The figure was earlier pegged at 4.5%.

Only in its latest monetary policy announced on April 8 has the central bank chosen to finally focus on the problem of inflation, having prioritised growth for the past two years.

“The pass-through of input cost pressures to retail prices has been limited till now but could increase as the output gap narrows and supply-chain disruptions persist,” Gaura Sengupta, economist at IDFC First Bank told The Economic Times newspaper on April 8.