A combination of normal rainfall supporting bumper crop production and the Reserve Bank of India’s (RBI) further interest rate hike to reduce easy money in the system are key to reducing the multi-year high inflation triggered by soaring food and fuel prices, economists said.

Although the government has leeway to further reduce excise duties on petroleum products to contain fiscal inflation, the focus will be on monetary policy to control price pressures. they added.

While retail price inflation rose to 7.04% in May year on year, down slightly from a 95-month high of 7.79% in April, wholesale price inflation or WPI hit a record high of 15.88% in May. Three-quarters of the price rise comes from food and a normal monsoon will help cool it as it boosts production and replenishes stocks.

The RBI has already raised interest rates by 90 basis points after inflation remained above its target range of 2-6% for a fifth consecutive month and is expected to raise interest rates by 80 basis points additional basics, they said.

For the common man, rising prices pierce a hole in his pocket. Edible oil prices, which had been a major contributor to inflation, began to ease a bit, with major players announcing some cuts.

”Petrol and diesel have become expensive but, in comparison, taxi fares have not increased much. We also have to pay the taxi companies. We have quite a bit left,” said Sukhwinder Singh, a 47-year-old taxi driver.

A 40-year-old vegetable vendor said it has become difficult to manage two meals a day as people opt for door-to-door delivery rather than buying from vegetable vendors. ”Medicines are getting expensive. We can’t even afford to get sick these days. ”Economic Affairs Secretary Ajay Seth said on June 16 that inflation in India was mainly due to high energy and food prices and hoped it would moderate in the coming months. “We are all aware that the summer months are tough months in terms of vegetables and other items,” he said. “High crude prices are certainly a challenge and all necessary and feasible measures are being taken.” S&P Global Rating economist Vishrut Rana said rising global commodity prices are a key driver of inflation and the outlook for food inflation, which carries significant weight in the overall food basket. CPI, will depend on the monsoon – sufficient rains will help agricultural producers and help control prices.

”There are additional policy options to deal with broader price pressures, such as cutting excise duties, lowering value added taxes or direct subsidies on agricultural products, but the emphasis , for now, will likely be on monetary policy. We expect a further rate hike of 75 basis points this year. Tighter monetary policy will help slow the rise in inflation,’ Rana told PTI via email.

India Ratings & Research’s senior economist Sunil Sinha said India being a net importer of commodities could not do much about it. However, to mitigate the impact, reducing import duties and subsidies is the solution. But these have their limits and cannot entirely offset the impact of imported inflation which, apart from high prices, also seeps into the economy via the depreciation of the rupee.

India Ratings and Research expects a further hike of 50 to 75 basis points for the remainder of FY23, it added.

Deloitte India economist Rumki Majumdar said the inflation was more the result of supply chain disruptions, both globally and domestically. Strong sanctions against Russia after the geopolitical crisis, new restrictions on the supply of oil and gas from Russia and recurrent blockages (due to the resurgence of Covid) in a few countries have added to the existing challenges in terms of logistics and supply chain.

EY India’s chief policy adviser, DK Srivastava, said that to ease supply constraints, fiscal policies that affect the real economy and focus on sectors affected by limited supply may prove more effective. But these usually take a relatively long time to bear fruit.

“We can expect some improvement in the situation by the third and fourth quarters of 2022-23,” Srivastava said.

Moody’s Analytics economist Shahana Mukherjee said volatility in global commodity markets is expected to keep inflation above RBI comfort levels heading into the September quarter.

”Widespread price increases due to supply disruptions have contributed to the rise in India’s wholesale price index. Moody’s Analytics expects the benchmark repo rate to be raised another 60 to 80 basis points in 2022. As part of the bi-weekly monetary policy, RBI earlier this month raised the inflation projection for l fiscal year by 100 basis points to 6.7%.

The prices of all commodities have increased significantly in recent years. From vegetables, school fees and bus fares to home loans, everything explodes.

Taking advantage of lower interest rates, many have opted for mortgages. During the COVID pandemic, interest rates were around 6.5% and they have now risen to 7.3-7.5%. This difference in interest rates sends the monthly budget of middle income groups, especially employees, out of whack. Many adjustments have to be made to compensate for the increase in the amount of the mortgage, explains Nageswara Rao, 50, who had taken out a mortgage to buy a house for two BHK.

Private school teacher Farhana Begum, who lives in a rented house, says it’s getting difficult given the rising costs of everything. ”Everything is getting expensive. But wages are not rising at the same rate as rising prices. I also take private lessons,” she said.

Arun K Nair, a hospital management expert in Kochi, said: This is going to hit the rural economy very hard soon…Cities could hold their own as wholesalers won’t pass the brunt any time soon.

S Krishna Mohan, Retired Lecturer in Vijayawada: “I feel that rising transport costs due to soaring diesel and gasoline prices have fueled the price hike. Yes, it has become a burden, with LPG rates also increasing. I can say that the impact of inflation is high on commodities, which pinches ordinary people.”

(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)