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Supply Management, Cut In Fuel Duties Help Control Prices This Fiscal, Says Survey

The Economic Survey 2021-22 on Monday said prices were mostly controlled during the current fiscal year so far on the back of better supply-side management

Cut In Fuel Duties Help Control Prices
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New Delhi, Jan 31 (PTI) Without giving any guidance for retail inflation going forward, the Economic Survey 2021-22 on Monday said prices were mostly controlled during the current fiscal year so far on the back of better supply-side management, as well as a reduction in duties in fuel prices.


 However, imported inflation in edible oil and pulses jacked up the prices of these commodities, which were controlled by proactive measures by the government.


 On the retail front, consumer price index-based inflation has remained well within RBI's sub-6-per cent comfortable zone during the April-December period of FY22.


 However, wholesale prices witnessed a sharp uptick at over 12 per cent due to pickup in economic activities, sharp spike in global crude oil prices as well as high freight costs, the Survey said.

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 "As economic activity started showing signs of picking up in the second year of the pandemic, the global economy faced the fresh challenge of rising global inflation. 


 "Covid-19 related stimulus spending in major economies along with pent-up demand boosting consumer spending pushed inflation up in many advanced and emerging economies," said the Economic Survey 2021-22 which was tabled in Parliament.


 Whereas factors such as surge in energy, food, non-food commodities, and input prices, supply constraints, disruption of global supply chains across the globe stoked global inflation during the year, on the domestic front, the average headline CPI inflation in India moderated to 5.2 per cent during April-December 2021-22.

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 The domestic inflation has been down from 6.6 per cent as against the corresponding period a year ago.


 Food inflation remained benign during the year at 2.9 per cent, significantly lower from 9.1 per cent in year ago period, effective supply side management kept prices of most essential commodities under control during the year.


 "Proactive measures were taken to contain the price rise in pulses and edible oils that reported high inflation reflecting the impact of imported inflation in these commodities. Notably, the edible oil prices peaked to over Rs 180-Rs 200 per litre during the year.


 Also, reduction in central excise and subsequent cuts in VAT by most states has also helped ease petrol and diesel prices. Prices of diesel and petrol had crossed over Rs 100-110 a litre in several states during the year.


 Prices of onions and potatoes remained under control, though retail prices of tomatoes witnessed an uptick during September to November 2021 due to untimely rains in major producing states.


 "However, with fresh arrivals in the market in December, retail prices of tomatoes too, are showing signs of easing. While seasonality plays a significant role in the case of vegetables, random shocks like untimely rains also have an impact on their availability and prices.


 "A strong network of cold storage chains well supported by effective transport infrastructure is needed to stabilize the prices of such perishable commodities," it said.


 The Survey also highlighted the divergence to retail and wholesale inflation, which remained a subject of debate during the year.

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 This divergence can be explained by factors such as variations due to base effect, the difference in scope and coverage of the two indices, their price collections, items covered and difference in commodity weights. Further, WPI is more sensitive to cost-push inflation led by imported inputs.


 "With the gradual waning of base effect in WPI, the divergence in CPI-C inflation and WPI inflation is also expected to narrow down," it said. 

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