August 5, 2021

Uptick in India’s headline inflation: A transitory phase

While economic growth remains the main focus, elevated inflation may ask for some attention.

For a second consecutive month the headline inflation rate, CPI (Consumer Price Index-Combined), has been above the 6 percent range of the central bank. The year-on-year percentage change (YoY%) print for June 2021 has marginally eased to 6.26 percent from 6.30 percent in May 2021. This is mainly due to easing off the sequential momentum to 0.6 percent month-on-month (MoM) in June 2021 versus 1.6 percent MoM in May 2021.

With inflation peaking above the acceptable barometre for the second month, the average CPI inflation in Q1 FY21-22 stands at 5.6 percent. This is above the RBI projection of 5.2 percent in the last Monetary Policy Committee (MPC) meeting. This rising inflation has now stirred a debate about whether it is sticky or transient. Policy prescription to tame this curve depends on…

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