Onion Potato Prices: India Retail Inflation Rate 2020 Latest Update | What are the Top Causes of inflation? Know Everything About? | Inflation rate @ 7.61%; The highest in six years; Don't stop after lockdown, know why?

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The central government has released inflation data for October. Accordingly, the inflation rate in October was 7.61%. This is the highest ever since Narendra Modi became Prime Minister in the last six years. Earlier in May 2014, the inflation rate was 8.33%, which also became a major reason for the fall of the UPA government led by Manmohan Singh. Inflation has been increasing continuously for the last nine months. Why did this happen and what would be the effect?

Why inflation rose?

The retail inflation rate is calculated based on the Consumer Price Index (CPI). If we look at the index for October, inflation in food items rose at a rate of 10.16%. The weightage (share) of prices of food items in inflation is 45.8%.

In October, onion-potato prices were skyrocketing in many cities. Onion had reached the rate of Rs 100 per kg. As a result, vegetables were 22% costlier last month as compared to October-2019. This raised food inflation and overall retail inflation.

… but inflation has been increasing for nine months?

this is true. Inflation has been increasing for nine months. Due to the lockdown in April and May, the government could not collect data from markets across the country. Since June, when the data from the market again, inflation has been increasing continuously since then. The reason for this is the rise in food inflation.

Actually, the supply of vegetables as well as eggs, fish and other protein products has been affected due to the lockdown across the country. With this, they are becoming expensive. In October, eggs became costlier by 21% and meat and fish by 18%. It also played a role in boosting food inflation.

Is this happening around the world?

No. The opposite trend is coming across the world. Inflation in October in China was the lowest in 11 years at 0.5%. The reason is the African Swine Fever. People have stopped eating pig and prices have come down due to increase in its population. There, inflation is expected to be negative in November.

In the US too, inflation in October was 1.3%. Inflation in Britain and Japan also remained around 0.5%. Actually, there is a danger of recession and deflation in these countries. Just as inflation is not good, inflation is also not considered good for the economy. There is a fear of falling growth rate.

What will change with the rise in inflation?

The government has entrusted the Reserve Bank of India (RBI) to keep the inflation rate at 4% with the increase of 2 percent. But inflation did not stop after the lockdown. October is the seventh consecutive month when inflation remains above 6%. The RBI did not reduce interest rates in the previous review. If inflation continues to rise in this manner, it is unlikely that interest rates will fall.

Union Bank MD and CEO Rajkiran Rai says that until inflation does not come down, there is no possibility of a fall in interest rates. According to him, there will be some relief in December and after a good harvest, inflation in February seems likely to come down.

Two days ago, the Reserve Bank said in the State of the Economy report that the prices of food items have not come down even by imposing stock limits on onions, increasing import of potato and onions, reducing import duty on grains. It is afraid that the current prices may not be normal.

At the same time, Economic Affairs Secretary Tarun Bajaj had said that the increased prices of food items are temporary. It is not going to last long. Prices will start coming down once the supply of essential commodities becomes normal.