How to beat inflation ?
CPI inflation for June 2021 offered a modicum of relief, easing marginally from the previous month, despite a pick-up in food inflation and rising retail fuel prices
Core inflation continues to push closer to 6% - which indicates that despite headline inflation being cost push in nature, elevated level of prices is not as transitory as RBI would like to build the narrative .
Separately, Bloomberg Economics’ India Truck Freight Inflation index, which tracks average monthly freight rates between Delhi and 81 Indian cities, rose to 8.40% in June, the highest in more than five years.
Rise in truck rentals is likely to contribute to higher transport and logistics costs and feed through into broader consumer goods and food inflation over time. Double digit inflation stares but the base effect impact is likely to keep the number from exploding higher immediately.
Pandemic had given an excuse for RBI to sharply reduce the rates which it gleefully accepted and the biggest borrower is more than pleased .
There is an apprehension that this "universally believed cyclical downward shift" is likely to become structural in nature as RBI is less inclined to be concerned about inflation more than paying occasional lipservice and justifying the same as transitory hump.
Although no discernible positive impact on growth is visible in the last 15 months of this unprecedented easy monetary policy except creating a mega bubble in equities , there is not even a semblance of chance of a mid course correction or atleast rethink.
The inflation forecasts may atleast be revised upwards in the next MPC review , amid a status quo in the rates and stance, albeit with underlying tone of uneasiness amongst few concerned members of MPC.
Expanding CB balance sheet with GSAP becoming more a norm rather than exception and Fiscal deficit accelerating , there is no inflation respite in the near future .But transitory rhetoric is set to continue. The new paradigm: Buy equities and beat inflation ..