03:22 GMT20 June 2021
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    Experts believe that inflation is on the rise because people don't have much money to shop with, crude oil prices are high and supply has been disrupted.

    India is struggling to cope with the COVID-19 pandemic but the Wholesale Price Inflation (WPI) being at an all-time high has added to its woes - year-on-year it has climbed to 10.49 percent because of the crude oil and mineral oil price spike. This is the first time the WPI has been in double digits - in February WPI was 4.17 percent and 2.51 percent in January.

    “The major reason for this is disruption to supply, because despite low demand prices are going up. Secondly, food prices have risen as the summer has come. Fuel prices are also high which increases the overall prices. The health cost has also shot up sharply as people are buying medicines at a high price and lastly, traders might also be taking advantage of the disrupted supply,” Dr Arun Kumar, veteran economist and former Professor at Jawaharlal Nehru University, told Sputnik.

    Kumar feels that comparisons with last year are meaningless since, during the same period last year, inflation was low as the government claimed it was unable to collect data. “So, the data on growth as well as inflation was incomplete,” he added.

    The fuel and power sector rose a whopping 20.94 percent in April with petrol prices jumping by 42.37 percent, high-speed diesel rising 33.82 percent and cooking gas prices up 20.34 percent.

    Shri Ram Shaw, another economic expert, believes that with summer already here, perishable products (especially vegetables) may see higher inflation, and the low base of last year will also have an adverse impact on wholesale inflation at least until August.

    The COVID-19 crisis, together with the economic crisis, has added to the Indian government's worries and it eagerly wants to take the situation under control.

    Sharing his views on how to control inflation, Kumar said that the government should first cut the tax on petroleum goods. “The high fuel prices lead to increased prices of all commodities,” he said.

    Taxes on fuel make up around 60 percent of the total cost and is the main reason it is so dear.

    Kumar also suggested that the government should extend support to those who have lost their job as they are the worst-hit. “Apart from this, the government should also ease the wholesale trade so that the price of essential commodities shoot up. This should be added to by increasing health infrastructure,” he added.

    Although echoing the views on cutting fuel taxes, Shaw said that the tax cut could slow down the propagation of second-round effects. With the present scenario in the country, it is expected that food inflation will rise in months to come which will result in high retail inflation as well.


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