Budget 2022: Economic Survey pegs CPI inflation at 5.6% within band; WPI witnesses uptick

A day before the presentation of the Union Budget 2022, Finance Minister Nirmala Sitharaman on Monday tabled the Economic Survey (2021-22) which indicated that India needs to be wary of imported inflation from elevated global energy prices. As per the survey, India’s Consumer Price Index inflation stood at 5.6 per cent YoY in December 2021, but Wholesale Price Index inflation (WPI) rose to 12.5 per cent, witnessing a sharp uptick during 2021-22 (April-December).

"Inflation has reappeared as a global issue in both advanced and emerging economies. India's Consumer Price Index inflation stood at 5.6% YoY in December 2021 which is within the targeted tolerance band," the survey report presented in the Parliament by Finance Minister Nirmala Sitharaman noted.

"Wholesale price inflation, however, has been running in double-digits. Although this is partly due to base effects that will even out, India does need to be wary of imported inflation, especially from elevated global energy prices," it said.

According to the survey, inflation has been higher in the current financial year compared to the previous year in all three major groups. In the 'fuel and power' group, it is above 20% reflecting the high international petroleum prices. 

The impact of rising international prices in WPI manufacturing was clearly visible, especially in the manufacture of basic metals, and minerals which witnessed high inflation throughout the year. Additionally, the 'crude petroleum & natural gas' sub-group also witnessed very high inflation and stood at 55.7% in December 2021. 

Retail Inflation inches to 6.2%

On the retail front, the average retail inflation inched up from 4.8% in 2019-20 to 6.2% in 2020-21. This has been attributed to COVID-19 related supply chain disruptions and stalled economic activity due to lockdown. Average retail inflation in 2021-22 (April-December) declined to 5.2% as against 6.6% during April-December 2020-21.

"Since July 2021, retail inflation is well within the tolerance band of the targeted limit of 4 per cent +/- 2 percentage points set by the Government for the period April 1, 2021- March 31, 2026. In 2021-22, the decline in retail inflation was led by the easing of food inflation," the Economic Survey stated. 

Food inflation, as measured by the Consumer Food Price Index (CFPI), averaged at a low of 2.9 per cent in 2021-22 (April to December), as against 9.1 per cent in the corresponding period last year. It declined between July and September 2021, though edging up, increased to 4.0 per cent in December 2021.

Miscellaneous, fuel and light major drivers of retail inflation

However, unlike 2020-21 (April-December) when 'food and beverage' drove inflation, during 2021-22 (April to December) the major drivers of retail inflation have been miscellaneous (35 per cent) and fuel and light (14.9 per cent) group. 'Transport and communication' contributed the most, followed by health in the miscellaneous group.

Moreover, the rise in oils component of the Food and Agriculture Organisation's (FAO) food price index from May 2020 onwards has been steep. "The current spike in prices of edible oils is mainly on account of high and increasing international prices of edible oils," the survey report said. It also revealed that the figure was at a 10-year high due to 'robust global import demand' amidst the shortages over migrant labour impacting production in Malaysia. 

(With agency inputs)