Inflation

Small savings schemes like Public Provident Fund (PPF), National Savings Certificate (NSC), Post Office Savings Scheme and Sukanya Samriddhi Yojana are vital savings instruments for the common man, as they provide long-term benefits. However, given that both public and private sector banks have raised their term deposit as well as home loan rates drastically since May 2022, keeping the rates of small savings schemes unchanged for the past two years has come as a surprise.

At 1.42 p.m., yield on 6.54 per cent -2032 bond were trading at 7.1696 per cent, sharply down from its previous close on 7.2894 per cent on Friday. Indian financial markets were closed on Monday and Tuesday on account of Independence Day and Parsi New year, respectively. "Easing crude oil prices and inflation print resulted in falling yields on bonds today," a dealer with a state-owned bank said.

The fourth advance estimates of production of major agricultural crops for the year 2021-22 have been released by the Union Ministry of Agriculture and Farmers Welfare. The production during 2021-22 is higher by 25 million tonnes than the previous five years' (2016-17 to 2020-21) average production of foodgrains.

The wholesale price index (WPI) had spiked to 15.18 per cent during the month of June. The WPI in July 2021 was at 11.57 per cent. Inflation in July, 2022 is primarily contributed by rise in prices of mineral oils, food articles, crude petroleum and natural gas, basic metals, electricity, chemicals & chemical products, food products, etc., as compared to the corresponding month of the previous year, said the ministry.

In a statement, Amul Dairy said in Gujarat, Delhi-NCR, Mumbai, West Bengal, its Taza milk 500 ml will cost Rs 25, Shakti 500 ml pouch Rs 28 and Gold Rs 31. Rs 2 per litre is increased for three ranges of milk." According to Amul, the hike is just a four per cent increase in price and lower than prevailing food inflation. Justifying the hike in prices, Amul said production and operation cost of milk has increased.

On Friday, data by Ministry of Statistics and Programme Implementation showed that the CPI inflation moderated to 5-months low to 6.71 per cent in July due to easing of food inflation, while, core CPI also moderated to 10-months low to 5.79 per cent in July. Telangana clocked the highest inflation rate of 8.58 per cent in July, compared to 10.05 per cent in June. Further, Telangana's rural inflation is above the urban inflation. Internationally, the inflation in the US has also moderated which increases expectations that US Fed will go slow on rate hikes.

Easing inflation can be attributed to price cuts on edible oil and easing commodity prices globally. Even though the CPI inflation has eased, it still remained above the Reserve Bank of India's (RBI) upper tolerance band. The overall goods inflation came in at 6.75 per cent as compared to 7.75 per cent in the previous month, while, inflation in vegetables was at 10.9 per cent in July.

The policy or the repo rate is the interest rate at which the RBI lends short-term funds to commercial banks. The RBI hikes the rate generally during an inflationary time to curtail liquidity in the economy. According to Das, the overall liquidity in the system is upwards of Rs 5 lakh crore touching Rs 6 lakh crore. Das said the RBI's Monetary Policy Committee (MPC) takes a calibrated view of aspects like growth, demand and makes a balanced call in terms of rate hike.

As per the government data, the average inflation was 6.65 per cent in 2014, came down to 4.91 in 2015 and further slipped to 3.33 in 2017. Even in 2019, it was 3.72 per cent but jumped to 6.62 in 2020. Average inflation rate in 2021 was 5.14 per cent. The National Statistical Office (NSO) releases the inflation rate on the 12th of every month (next working day if 12th is a holiday), based on the Consumer Price Index (CPI).

Retail inflation tracked by the Consumer Price Index (CPI) measures the changes in prices from a retail buyer's perspective. The CPI Inflation has been rising since September last year and remained above upper tolerance band of the Reserve Bank of India (RBI) for straight six months starting from January this year. CPI numbers has seen a sharp rise in April at 7.79 per cent, followed by 7.04 per cent in May this year.