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Inflation matrix: On the numbers and trends

December’s price rise numbers do not ring in enough relief

In the final inflation (मुद्रास्फीति) print before the Union Budget for 2025-26 is presented, followed by the first review of the monetary policy led by the new Governor of the Reserve Bank of India (RBI) in early February, the price rise faced by Indian consumers eased to 5.22% in December. Although a four-month low, this still marked only a mild decline from November’s 5.5% uptick (वृद्धि, उछाल) in the Consumer Price Index (CPI), and was largely driven by a sequential (अनुक्रमिक, क्रमिक) easing in food prices. Food inflation moderated (मध्यम, औसत) from over 9% in the previous month to 8.4% last month, and though inflation in vegetables cooled from 29.3% to 26.6%, it still remained generally high. Households still forked out a lot more for their meals than they did a year ago — it must be recalled (स्मरण करना, याद करना) that overall inflation was 5.7% and food price rise, over 9.5% in December 2023. While prices of some food items, including vegetables, are seen cooling further this month, those of a few critical ingredients have started spiking, including of edible oils, that rose at a 33-month high pace of 14.6% in December. Eggs, meat and fruits also saw inflation accelerating last month along with the relatively humble (विनम्र, सरल) potato (up 68.2%). Moreover, inflation in wholesale prices has gained pace, signalling that there is room for higher costs to be passed on to consumers for food items as well as manufactured products.

The government and industry want the RBI to cut interest rates to reinvigorate (पुनर्जीवित करना) consumption and fading growth impulses by looking through ‘volatile’ food inflation. But even industry captains admit that just keeping food prices out of the interest rates and growth-inflation balancing act will not suffice. Moreover, even if the weightage for food in the CPI is reduced in line with the recent household consumption spending survey results, food price trends have a material impact on the spending propensity (प्रवृत्ति, झुकाव) of households and their inflation expectations. Inflation may yet average 4.5% through January to March, as the RBI expects, but the central bank that has committed to await a durable (टिकाऊ, स्थायी) alignment to its 4% goal before slashing (कटौती करना, घटाना) rates, has a difficult call to make in February. Tangible measures, if any, to ease price pressures in the Budget, along with some visibility on the Centre’s fiscal glide path, could help tip the scales for a rate cut cycle to begin soon, if not next month. There are a few new imponderables (Difficult or impossible to estimate or assess) that have compounded the trade-off matrix for policymakers in North Block as well as Mint Street — the swift unravelling (सुलझाना, स्पष्ट करना) of the rupee vis-à-vis the dollar in recent weeks which raises the risk of importing inflation, among other collateral effects, especially as global oil prices have resurged to multi-month highs. A very nuanced approach is imperative to avoid fresh missteps.

Courtesy: The Hindu

Important Word List With Meaning

1.Inflation (Noun)

Hindi Meaning - मुद्रास्फीति
English Meaning - The rate at which the general level of prices for goods and services rises.

2.Sequential (Adjective)

Hindi Meaning - अनुक्रमिक, क्रमिक
English Meaning - Forming or following in a logical order or sequence.

3.Uptick (Noun)

Hindi Meaning - वृद्धि, उछाल
English Meaning - A small increase or upward trend.

4.Moderate (Adjective)

Hindi Meaning - मध्यम, औसत
English Meaning - Average in amount, intensity, or degree.

5.Recall (Verb)

Hindi Meaning - स्मरण करना, याद करना
English Meaning - To bring a memory back into one’s mind.

6.Humble (Adjective)

Hindi Meaning - विनम्र, सरल
English Meaning - Having or showing a modest opinion of one's own importance.

7.Reinvigorate (Verb)

Hindi Meaning - पुनर्जीवित करना
English Meaning - To give new energy or strength to something.

8.Propensity (Noun)

Hindi Meaning - प्रवृत्ति, झुकाव
English Meaning - A natural tendency to behave in a particular way.

9.Slash (Verb)

Hindi Meaning - कटौती करना, घटाना
English Meaning - To reduce or cut something drastically.

10.Durable (Adjective)

Hindi Meaning - टिकाऊ, स्थायी
English Meaning - Able to withstand wear, pressure, or damage.

11.Unravel (Verb)

Hindi Meaning - सुलझाना, स्पष्ट करना
English Meaning - To solve or make something clearer.

12.Imponderable (Adjective)

English Meaning - Difficult or impossible to estimate or assess.