By Dr. Gyan Pathak
The erosion of about one per cent of value of rupee in the consumer market within a month was too great a shock for people to absorb. It was felt by everyone in March 2022, and the workers, senior citizens, women and children were among the hardest hit.
The latest data released by the Ministry of Statistics and Programme Implementation on March 12, though underestimated, recorded the retail inflation to have risen to 6.95 per cent in March 2022 as against 6.07 per cent in February, a rise of 0.96 per cent in a month. The rise was the highest since October 2020. As for the core inflation, excluding food and fuel, it rose to 6.53 per cent in March as against 6.22 per cent in February, which is highest since 2014. Even this level of inflation is an underestimate, since the data does not fully capture the impact of the hike in fuel prices towards March end. People might have suffered more than we expected, and the present data reveals.
The story of untold miseries and predicaments are thus concealed behind the underestimated data. All these suggest only one thing – the inflation will remain elevated even in the current month April and beyond, and with it the miseries of the common people.
The greater part of hardship comes from the inflation in food and beverages that jumped from 5.93 per cent in February to 7.47 per cent in March. It was 1.54 per cent rise in just one month. With the rise in prices millions of people resorted to even reduce the quantity of nutritious foods, which impacted the women and children the most. Consumer food price has increased by 100 per cent between March 2021 and March 2022, the CPI revealed. The most disturbing trend registered in rural areas where consumer food price inflation rose to 8.04 per cent in March 2022 compared to March 2021. Even CPI for rural areas went up to 7.66 per cent from 4.61 per cent a year before.
CPI inflation in oils and fats rose to 18.79 per cent in March as against 16.4 per cent in February. Inflation for vegetables rose to 11.64 per cent from 6.13 per cent while clothing and footwear rose to 9.40 per cent from 8.6 per cent. Beyond food and beverages, most of the commodity groups touched multi-months highs. The overall Consumer Price Index inflation reached almost 7 percent, which was about one per cent higher than in February. It resulted in shrinkage in overall consumption of the person in extreme poverty, the poor and the middle-class.
If we look at the inflation on year on year basis, inflation in clothing, footwear, and household goods and services was the highest over 100 months, ie in over eight years. Heath inflation has stayed above 6 per cent for the last 15 months, and it is set to rise due to hike in costs of essential medicines from April1, 2022. Rise in fuel prices will further push prices of all things due to rise in cost of transportation which would further increase inflation.
Its impact on the senior citizen, especially those who survive on interest by their lifetime deposit, was just devastating. Senior Citizen Savings Scheme give them an interest rate of only 7.4 per and in some others they are getting up to maximum 7.75 per cent. If the inflation eroded their earnings by 6.95 per cent, they effectively earned much less than one per cent on their deposits. With reduced value of their earning they felt themselves in too miserable a condition.
As for the workers, we can categorise them in two classes – those who are covered under Employees Provident Fund and those who are not covered. EPFO has recently lowered the interest rates on EPF deposits for 8.1 per cent. It means the formal workers of organizsed sector will be effectively earning only 1.15 per cent after the erosion of 6.95 per cent due to inflation. Finance Minister Nirmala Sitharaman had defended the interest rate cut saying that the figure is dictated by today’s circumstances when interest rates on other small savings schemes are much lower.
True, interest rate on many small savings schemes for non senior citizens are even lower than the inflation rate of 6.95 per cent, which means that almost all poor and middle-class citizens will have effectively negative earning on their small deposits.
Since majority, above 90 per cent, of the workforce in the country are in the informal and unorganised sector, their wages are not even linked with the CPI, and therefore they don’t get any relief from any dearness allowance linked to CPI. Most of them earn less than a little over the minimum wages. An inflation of around 7 per cent is just breaking their hopes of survival, and hence they have resorted to cost cutting on food and other essential items. One can just imagine how they are surviving after paying for rents, children, clothing, and medical expenses.
No one has expected such a sharp rise in CPI inflation. Experts and economists were expecting it to be around 6.4 per cent. March inflation of 6.95 did not only exceed this expectation, but it also exceeded the RBI’s Monetary Policy Committee’s upper target for the third straight month. It should be noted that the RBI has raised its inflation protection to only 5.7 per cent for 2022-23, which was earlier set at only 4.5 per cent. The estimate was based on an assumption of international crude oil prices at $100 per barrel on an average. (IPA Service)