Inflation cost Indians extra Rs 5.8 lakh cr in last 3 yrs

Indian households incurred an additional expenditure of whopping Rs 5.8 lakh crore in the last three years, due to spiralling inflation and dearer food items, says a research report.

"The rise in inflation to 8% per year during 2008-09 to 2010-11, from 5% in the preceding three years eroded the purchasing power of money and inflated the consumption expenditure bill of Indian households by Rs 5.8 trillion (Rs 5.8 lakh crore)," research firm Crisil said in a study 'Inflation Hurts'.

It said that inflation was not uniform and food items saw a much sharper price increase as compared to non-food items during the three-year period.

"Food inflation was at 11.6% during 2008-09 to 2010-11 as compared to non-food inflation of 5.7%," Crisil said.

Headline inflation, which includes both food and non-food primary articles besides manufactured items, has been above the 8% mark since January 2010. It stood at 9.06% in May this year.

The Reserve Bank has hiked its key-policy rates 10 times since March 2010 to curb demand and tame inflation.

In its annual monetary policy for 2011-12, the RBI said that inflationary pressure is likely to continue during the first half of the current fiscal on account of high global commodity prices, particularly crude.

The apex bank had exuded confidence that the pressure from high food prices would moderate in the days to come. However, after a brief period of moderation, food inflation has again started surging and stood at 9.13% for the week ended June 11.

This happens even as manufactured inflation, which has over 65% share in the Wholesale Price Index (WPI) basket, has breached the 7% mark.

"The surge in inflation was initially driven by supply shocks such as a rise in food and fuel prices, which then spread to manufacturing goods as well," Crisil said.

Headline inflation for the whole of 2010-11 averaged 9.6% as compared to a mere 3.8% during the previous fiscal.

Experts have said that with the recent hike in prices of diesel, kerosene and cooking gas, overall inflation is likely to touch double-digit in July.

The study said that growth of private consumption expenditure in nominal terms increased to nearly 17% per year during 2008-09 to 2010-11, as against 14% in the preceding 3 years mainly due to rise in food inflation.

Crisil said the price trends of commodities in the WPI favour the middle and higher income classes, rather than poor and vulnerable Indian households who spend large part of their income on food.