Retail inflation has crossed the upper limit of RBI’s tolerance band since January 2022.
Consumer price inflation in India went through three phases in 2022. A rising phase up to April 2022 when it crested at 7.8 per cent, then a holding pattern at around 7.0 per cent up to August 2022 and then a decline to around 5.7 per cent by December 2022.
According to Housing Price Index (HPI) published by National Housing Bank (NHB), the overall increase in composite HPI assessment and HPI market price in Quarter Ending (QE) September 2022 over QE September 2021 indicates a revival in the housing finance sector.
In general, the year 2022 was marked by a return of high inflation in the advanced world after three to four decades, depending on the country.
In India, the government and the central bank took decisive measures to cap the rise in prices. India’s retail inflation rate peaked at 7.8 per cent in April 2022.
Domestic Retail Inflation
FY22 witnessed lower CPI-Combined (CPI-C) based retail inflation as compared to FY21.
During FY22, some sub-groups such as ‘oils & fats’, ‘fuel & light’ and ‘transport & communication’ reported high inflation. This was mainly driven by supply disruptions caused by pandemic-induced lockdowns.
The subsequent year (FY23) began with the Russia-Ukraine crisis that led to high headline inflation rate in April 2022.
In FY23, retail inflation was mainly driven by higher food inflation, while core inflation stayed at a moderate level.
Food inflation ranged between 4.2 per cent to 8.6 per cent between April and December 2022, while the core inflation rate stayed at around 6 per cent except in April 2022.
Food inflation based on Consumer Food Price Index (CFPI) climbed to 7.0 per cent in FY23 from 3.8 per cent in FY22. Though the increase in food inflation is broad-based, the major contributors are vegetables, cereals, milk and spices.
Fuel Price Inflation
Declining Global Crude Oil Prices 5.23 in FY22 and FY23, inflation in WPI ‘fuel and power’ was mostly driven by high international crude oil prices.
In response to subdued global demand because of Covid-19 induced restrictions, the price of the Indian basket of crude oil during FY21 stayed in the range of US$20-65/bbl.
Pharmaceuticals Prices
Until 31 December 2022, ceiling prices for 890 formulations of 358 drugs/medicines across various therapeutic categories under National List of Essential Medicines (NLEM), 2015 have been fixed by National Pharmaceuticals Pricing Authority.
Subsequently, NLEM 2022 was promulgated by Ministry of Health and Family Welfare in September 2022 and revised Schedule I of Drugs (Prices Control) Order (DPCO) was notified on 11 November 2022 by Department of Pharmaceuticals incorporating NLEM, 2022.
