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India Is Facing Imported Inflation: Experts

The retail inflation for farm and rural labourers increased to 6.67 per cent and 7 per cent, respectively in May due to higher prices of certain food items

Photo Credit : REUTERS/Eduardo Munoz


Amid the supply chain disturbance due to the Russian invasion of Ukraine, India is facing imported inflation in the entire country, the Indian economy experts said on Monday.

A general and sustainable price hike in the prices of imported fuels, materials and components increases domestic costs of production. This results in increases in the prices of domestically produced goods. 

The major reason behind the imported inflation is a decline in the value of India's currency. As currency performs poorly in the foreign exchange market the higher the price of imports. 

The Indian rupee has declined by 22 paise to close at a fresh lifetime low of 79.48 (provisional) against the US dollar on Monday, tracking a strong greenback overseas and subdued domestic equities. 

At the interbank forex market, the local unit opened weak at 79.30 against the greenback and witnessed an intra-day high of 79.24 and a low of 79.49, news agency PTI reported. 

Rajni Thakur, Chief Economist, RBL Bank said, " We are definitely facing imported inflation at the moment. All major components of CPI-food, fuel and core are witnessing double-digit growth largely driven by the higher price of imported goods and consequent rise in input prices. The lower value of a currency is also adding to the price pressure."

In India, the retail inflation rate eased to 7.04 per cent in May from 7.79 per cent in April due to a favourable base effect, as per data released by the Ministry of Statistics and Programme Implementation. 

The retail inflation for farm and rural labourers increased to 6.67 per cent and 7 per cent, respectively in May due to higher prices of certain food items.

"The risk of imported inflation has only gone up with the rupee plunging to record levels. Given that the global commodity prices remain elevated, the depreciating rupee will further add to the prices of goods in the domestic economy. However, RBI is taking effective steps to ensure stability in price and Rupee value, while ensuring growth, Pradeep Multani, President PHD Chamber of Commerce and Industry. 

Meanwhile,  India's annual wholesale price-based inflation rose to a record 15.88 per cent in May, as compared to 13.11 per cent in May 2021, said the Ministry of Commerce and Industry.  At 15.88 per cent, the WPI inflation print for May is the highest in the current series, data for which is available starting April 2013.

While talking about imported inflation, Prasenjit K Basu, Chief Economist, ICICI Securities said that India is facing it, particularly for crude oil, but also for a few other commodities like edible oil, coal and iron ore.