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Retail inflation hits 5-year high: Two rare imports for the economy

Though this is temporary, a sustained situation like this would mean weakened ability to handle the slowdown, especially for the poorest

Abhishek Waghmare 

GDP, growth, money, inflation, Food, edible, price rise, vegetables, retail stores, grocery, market, buyers, consumers, customers, spending,
Representative Image

based on the consumer price index climbed to its highest since July 2014. But a deeper look at the data shows two rare situations in the economy right now.

For the first time in 8 years, becomes equal to nominal growth

The first chart shows since 2012, while has spiked many times, it has never been higher than the nominal rate of growth in the economy. In December 2019, if we assume that the economy grew at 7.5 per cent in nominal terms, as the advance estimates show, then it means that consumer prices are rising at a pace equal to Though this is temporary, a sustained situation like this would mean weakened ability to handle the slowdown, especially for the poorest.

Inflation

Source: National Statistical Office, Reserve Bank of India, CRISIL

surpasses core inflation by widest margin since May 2013

The second chart shows that the difference between consumer inflation and core inflation in December was the highest since May 2013. If this sustains, it would mean that companies are unable to price their goods and services due to weak demand, and at the same time, basic necessities of life would eat up a substantial chunk of the incomes of the weakest, whose incomes are already growing slowest in many decades.

Inflation

Source: National Statistical Office, Reserve Bank of India, CRISIL

First Published: Tue, January 14 2020. 01:14 IST
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