Here’s what can be done to keep inflation in check: An explainer : Rashtra News
#Heres #inflation #check #explainer
With India’s inflation expected to remain elevated for some time, economists have suggested further cut in excise duty on fuel, a key driver of the sharp price rise in the recent months. Further reduction in fuel duties and supply-side measures are some of the steps experts have suggested to keep inflation in check, as other tools like monetary tightening and fiscal consolidation at this stage can undermine economic recovery. Kirtika Suneja explains
Annual inflation
November WPI climbed to its highest since 1991
Core inflation, a measure of demand, remains high and sticky
Government cut excise duty on petrol by Rs 5 and diesel by Rs 10
Divergence between WPI and CPI
Here’s a weight comparison of the two baskets
WPI doesn’t include taxes, CPI does
Two indices measure different baskets
CPI includes services, WPI is only goods
What can be done to contain inflation?
Fuel duty cut
Further duty cuts by at least Rs 5 per litre
Likely to lower inflation by 15-20 bps
Has immediate and secondary impact on electricity, transport cost
High telecom tariff, currency depreciation eroded first cut
1% rise in oil (Indian baskt) could raise WPI by 8 bps
2. Food Prices
Crackdown on supply side if hoarding happens
Ease import limits on pulses, oil seed
3. More duty cuts
More duty cuts for edible oil imports
Duty on refined palm oil, refined palmoline now 13.75% vs 19.25% earlier
4. Buffer stock
Prepare to use buffer stock if inflation spills over to cereals
1% rise in WPI primary food prices can go up CPI by 48 bps
5. Other measures
Press for faster growth: 10% higher industrial output can ease retail inflation by 40 bps
Address supply bottlenecks
Boost income generating capacity to reduce burden on low income households
( News Source :Except for the headline, this story has not been edited by Rashtra News staff and is published from a economictimes.indiatimes.com feed.)