English Article

Pain From Prices

More fuel tax cuts are needed to prevent inflation from hurting the recovery.

The latest inflation data, both retail and wholesale, point to accelerating price gains that could potentially undermine the fragile economic recovery by pushing up costs and depleting consumers’ purchasing power. November’s Consumer Price Index (CPI) shows year-on-year inflation at the retail level quickened to a three-month high of 4.91%, from 4.48% in October. Even on a sequential basis, last month’s CPI reveals prices are estimated to have risen 0.73% from October with as many as 10 of the 12 constituents of the food and beverages category witnessing month-on-month inflation. Food was in fact a major driver of the quickening in price gains on an annual basis. Vegetable prices surged from October, logging 7.4% month-on-month inflation. Also, the Union government’s belated and marginal reduction in excise duty on petrol and diesel, which was followed by cuts in local value added taxes by many States, barely slowed the pace of inflation in the transport and communication category: the rate eased 88 basis points from 10.90% in October, to 10.02% in November