NCP (SP) MP Supriya Sule. File
| Photo Credit: PTI

Ahead of the 54th GST Council meeting on Monday (September 9, 2024), NCP (SP) MP Supriya Sule has called for urgent action on various issues related to GST rates, including the need to rationalise taxes on essential goods and services, particularly in the sectors of food, healthcare, education, and renewables, amidst rising unemployment, food inflation, and a slowing GDP growth rate.

“Given the current economic climate, it is essential that the government eases the financial burden on our citizens by rationalising taxes on important goods and services,” she said.

Speaking to The Hindu, Ms. Sule targeted her cousin, Maharashtra’s finance minister, Ajit Pawar, over his repeated absence from previous GST Council meetings.

“As the sole representative of Maharashtra’s 13 crore citizens, the finance minister’s absence has left the State without a voice on crucial GST-related decisions,” she said, urging Mr. Pawar to attend the meeting to advocate for State’s interests.

Focusing on the soaring food inflation, she reiterated her demand for the removal of GST on essential commodities like pulses, cereals, and dairy products. She called the 12% GST on dairy items such as butter and ghee “unacceptable.” “The 12% GST rate on butter, ghee, and other dairy products is simply unacceptable,” the four-time MP from Pune’s Baramati said.

Agriculture, another critical area, saw a mere 2% growth in the first quarter of 2024, she said. “This is not a temporary dip; agriculture has been in a long-term slump for the past decade. High GST rates on essential agricultural products, such as fertilisers and machinery, have exacerbated the distress in the sector. If we are to revive agriculture in India, there must be 0% GST on the entire sector,” Ms. Sule, daughter of NCP (SP) supremo Sharad Pawar, and the party’s national working president, said.

She urged Union Finance Minister Nirmala Sitharaman to also reduce GST rates on healthcare products and services, particularly for senior citizens. “India’s out-of-pocket health expenditure continues to hover around 50%, a staggeringly high figure compared to the global average of 17.05%. The government must work to ease this burden of healthcare costs on our citizens by reducing the high GST rates on various healthcare products and services, particularly for senior citizens,” she said.

The 18% GST on medical insurance is disproportionately impacting senior citizens, she said, quoting Union Minister Nitin Gadkari’s statement that it “amounts to taxing individuals seeking cover against life’s uncertainties.”

Ms. Sule urged the government to lower the GST on medical insurance for senior citizens from 18% to 12%, as recommended by the Standing Committee on Finance in February.

If the Insurance Regulatory and Development Authority of India’s target of ‘Insurance for All by 2047’ is to be met, it is imperative that the government reduce the GST rate on medical insurance for senior citizens from 18% to 12%, she said.

The Baramati MP also called for life-saving drugs and medical equipment to be exempted from GST, arguing that it would “provide great relief to patients and incentivize domestic production.”

She further criticised the imposition of 18% GST on private schools, higher education institutes, and EdTech platforms, stating that it places a significant financial burden on parents. “The government should lower the GST on these products to make education more affordable,” she added.

Speaking about the issue of consumer demand, she said the government should cut down the GST on essential appliances from 12% to 5% and on aspirational appliances from 28% to 18%. She also called for a rationalisation of GST on electric vehicles and related technologies to promote investment in battery-swapping infrastructure. “There is disparity in GST rates for EVs with and without batteries, and for lithium-ion batteries sold separately. This difference in GST rates disincentives investment in battery-swapping technology.”

She also said there is need to support handloom weavers, whose livelihoods were severely impacted by the COVID-19 pandemic. “Handloom clothes and raw materials must be exempted from GST to alleviate their financial distress,” she said, adding that with the current political landscape, there should be no obstruction in implementing these changes, except a lack of will.

Tracking rising temperatures is becoming a better way of forecasting food inflation in India than the rain patterns economists have typically relied on, according to HSBC Holdings Plc.

The link between extreme heat, exacerbated by climate change, and the price of agricultural commodities in India has strengthened over the past decade, the bank said in a report released Thursday. The correlation between temperatures and cost of perishable staples such as fruit and vegetables in the country rose to 60% this year from 20% in 2014, it said.

Inflation remains well above the Reserve Bank of India’s 4% target due to volatile food costs, prompting the authority to hold its policy rate for the last year and a half.

HSBC said it expects consumer-price gains to ease toward the end of the year as temperatures drop after the summer heat wave. But “over the medium term, rising temperatures could become a big problem for inflation management,” it said.

Analysts used to estimate food inflation changes by looking at the levels of India’s reservoirs, a measure that the bank’s economists said may soon become obsolete.

This is possibly due to improved irrigation systems that mitigate the impacts of scarce rainfall, while there is currently no solution to shield crops from extreme heat, they said.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Inflation in consumer prices eased to a nearly five-year low of 3.54% in July, with food price rise moderating to 5.4% from a six-month high of 9.4% in June, thanks to base effects from last July when retail inflation stood at 7.4% and the food index was up 11.5%. File
| Photo Credit: Sushil Kumar Verma

Inflation in India’s consumer prices eased to a nearly five-year low of 3.54% in July, with food price rise moderating to 5.4% from a six-month high of 9.4% in June, thanks to base effects from last July when retail inflation stood at 7.4% and the food index was up 11.5%.

Inflation faced by urban consumers dropped to just under 3% in July, from 4.4% in June, while rural consumers experienced a relatively higher price rise of 4.1%, down from 5.7% in June.

Food price rise was also higher in rural India at 5.9% compared with 4.6% in urban parts of the country. In June, rural food inflation was lower at 9.15% while urban food prices were up 9.6%.

“During the month of July 2024 there is a decline in inflation for all the groups. Significant decline is in the vegetables, fruits and spices subgroups,” the Ministry of Statistics and Programme Implementation said.

July’s inflation rate marks a sharp dip from the four-month high of 5.1% recorded in June, and is the slowest uptick in prices recorded since September 2019.. This also means that this is the first time since then that the inflation rate has gone under the 4% median target pursued by the Reserve Bank of India (RBI) in its monetary policy.

This is the first time in nine months that food inflation has dropped below 8%

At its latest monetary policy review last week, the RBI had retained the average inflation projection for this year at 4.5%, but had raised the estimate for the July to September quarter to 4.4% from 3.8% projected earlier. This suggests that price rise will regain momentum over this month and next, with an average inflation of over 4.8%.

New Delhi:

The central government’s timely interventions and stability measures by the Reserve Bank of India (RBI) helped maintain retail inflation at 5.4% despite the pandemic and geopolitical tensions, according to the Economic Survey 2024.

Headline inflation, which the RBI expects at 4.5% in FY25 and 4.1% the following year, is “under control”, said Finance Minister Nirmala Sitharaman. The inflation rate of some food items, however, is elevated, the government admitted.

Economic Survey 2024, which gives an insight into the current state of the economy, was tabled by the Finance Minister in the Parliament this morning, a day before presenting her seventh Budget.

The survey said supply disruptions caused by the COVID-19 pandemic and global conflicts led to an increase in the prices of consumer products and services in FY22 and FY23. However, timely policy interventions by the government helped maintain the retail inflation at 5.4% in FY24, it added.

This is the lowest the retail inflation has eased since the pandemic.

The survey also attributed the low retail inflation rate to price cuts for LPG and fuel by the government. The government reduced LPG prices by Rs 200 across India last August and cut petrol and diesel prices by Rs 2 this March.

The RBI raised policy rates by a cumulative 250 bps between May 2022 and February 2023, managed liquidity levels efficiently, and maintained consistent and coherent communication with market participants, the effect of which was reflected in the latest inflation data, the survey said. The retail inflation for last month was at 5.1%.

The core inflation has declined to a 4-year low, the survey added.

Food inflation, which stood at 6.6% in FY23, increased to 7.5% in FY24. The survey attributed the rising food prices to adverse weather conditions, depleted reservoirs, and crop damage, which impacted farm output and food prices.

Tomato prices spiked due to region-specific crop disease, early monsoon rains, and logistical disruptions, it said.

The survey also said that the Indian economy has recovered and expanded in an orderly fashion post pandemic. The economy is expected to grow between 6.5% and 7% this financial year, the government said.

Food prices rose 1.14% over April levels. Image used for representative purpose only. 
| Photo Credit: K. Murali Kumar

Inflation in India’s wholesale prices accelerated to a 15-month high of 2.61% in May, more than double April’s pace, with food inflation surging to a 10-month peak of 7.4% driven by steeper prices for vegetables, fruits, pulses and cereals, and a resurgence of price rise in manufactured products after 14 months of decline.

Economists said the rise in wholesale inflation in May signals there is room for a further surge in consumer prices despite retail inflation easing to a 12-month low of 4.75% last month, especially as food and industrial input prices are spiking globally. May was the seventh month in a row that the WPI rose on a year-on-year basis after seven consecutive months of decline, and it is expected to rise over 3% this month.

On a month-on-month basis, the Wholesale Price Index (WPI) was up 0.2% in May, easing from a ten-month high of 0.8% a month earlier, with food prices rising 1.14% over April levels and manufactured products’ prices up 0.64%.

The heatwaves in May helped fire up the inflation rate for vegetables to the highest level in nine months at 32.4%, and a six-month high of 5.8% for fruits. Price rise in cereals sped to 9%, while that for pulses reversed direction to hit a six-month high of 22%.

Within vegetables, tomato prices were up 64.5% in May from 40.6% in April, while inflation in onion and potato dropped slightly to a tad over 58% and 64%, respectively. Bank of Baroda chief economist Madan Sabnavis said these spikes in vegetable prices were partly due to supply shortfalls and the heat wave aggravated the challenge. “This is a major concern as it will keep up the pressure on the inflation till the next crop comes,” he told The Hindu.

India Ratings flagged similar concerns about pulses prices remaining elevated in double-digits as the new crop would be harvested only in October-November. “Elevated food inflation at the wholesale level is worrisome as this would keep retail food prices firm even going forward. Retail food inflation has been above 8% for the past seven months,” said the firm’s senior director and principal economist Sunil Kumar and senior analyst Paras Jasrai in a note.

India Ratings expects retail food inflation to remain over 8%, with wholesale prices expect to rise further to 3.5%, in June. CareEdge Ratings’ chief economist Rajani Sinha also pointed out that industrial metal prices have risen 9.3% since March-end and food prices are increasing globally.

“Positive rate of inflation in May is primarily due to increase in prices of food articles, manufacture of food products, crude petroleum & natural gas, mineral oils, other manufacturing, etc,” the Commerce and Industry Ministry said.

With prices rising 17.14% in May, pulses have now completed a year of over 10% inflation. File
| Photo Credit: The Hindu

India’s consumer price inflation eased a tad from 4.83% in April to a one-year low of 4.75% in May, but food price rise remained unchanged at 8.7%, with urban households facing a sharper 8.83% spike in food inflation. Retail inflation stood at 4.31% in May 2023, with food prices rising less than 3%.

May was the fourth successive month with food inflation of over 8.5%, though it cooled fractionally for rural consumers from 8.75% in April to 8.62%. On a month-on-month basis, the Consumer Price Index (CPI) was up 0.5% in May, while the food price index had risen 0.73% from April’s levels. The sequential rise in food prices was 0.7% for rural consumers and 0.9% for their urban counterparts.

Also Read | Fleeting relief: On slide in retail inflation 

The gap between urban and rural consumers’ inflation trends was sharp for the third consecutive month, with rural households seeing a 5.3% rise in prices in May. For urban consumers, the retail inflation pace was 4.15%, just fractionally higher than 4.14% in March and 4.11% in April.

While retail inflation has now been below 6% since September 2023, it is still far from the central bank’s 4% target. The Reserve Bank of India (RBI) expects retail inflation to average 4.5% this year and has projected an average of 4.9% for the April to June quarter. With April and May inflation coming in slightly below that, it is likely that price rise may resurge to over 5% this month.

Vegetable prices

Barring spices, where the inflation rate cooled to 4.3%, the lowest level in at least two years, price pressures persisted for most food items. Vegetable prices rose 27.3% in May, while the inflation rate accelerated for cereals (8.7%), eggs (7.6%), fruits (6.7%) as well as pulses. With prices rising 17.14% in May, pulses have now completed a year of over 10% inflation.

Meat and fish prices were up 7.3% in May, easing a tad from 8.2% in April. Edible oil prices were down 6.7% from last year compared with a 9.4% dip in April, making it the mildest decline in prices in at least 14 months.

Terming the rising inflation in key food items such as cereals and pulses, and the rigidity in vegetable prices as worrying, Crisil principal economist Dipti Deshpande said the progress of the southwest monsoon would influence the food inflation trajectory over the next few months and there could be softening this month.

Also Read : Extreme weather may pose risk to inflation, says RBI Bulletin

“Non-food inflation continues to offer respite, printing at a record low of 2.3%. Much of this was due to core sliding to 3%, also a record,” she noted.

“A favourable base effect is expected to persist till July 2024, helping absorb potential upward risks to price pressures to a certain extent. If food inflation moderates, we expect the RBI to cut the policy interest rate by a shallow 50 basis points in two tranches in the second half of the fiscal year,” said CareEdge Ratings’ chief economist Rajani Sinha. One basis point equals 0.01 per cent.

April marks the sixth successive month that the Wholesale Price Index has risen on a year-on-year basis. Representational file image.
| Photo Credit: SUSHIL KUMAR VERMA

Inflation in India’s wholesale prices rose to a 12-month high of 1.26% in April, from 0.53% in March, owing to an uptick in food inflation and a 1.4% year-on-year rise in fuel and power prices after several months of deflation.

The Wholesale Food Index rose 5.5%, compared with 4.65% in March, while the decline in manufactured products’ prices eased to 0.4% in April from 0.8% in the previous month. Inflation in primary articles also moved up from 4.5% in March to 5% last month, indicating a broad-based reversal of wholesale price trends.

Also read | Food inflation scaled 4-month peak of 8.7% in April

April marks the sixth successive month that the Wholesale Price Index (WPI) has risen on a year-on-year basis, after seven months of deflation. On a month-on-month basis, the WPI was up 0.8% with primary articles and food prices rising nearly 2% in April, while manufactured products were up 0.5%.

“Positive rate of inflation in April, 2024 is primarily due to increase in prices of food articles, electricity, crude petroleum & natural gas, manufacture of food products, other manufacturing, etc.”, the Commerce and Industry Ministry said.

Food inflation surged to a four-month high of 8.7% in April from 8.52% in March. Representational file image.
| Photo Credit: Reuters

Consumers faced a further acceleration in steep food prices in April, even as India’s overall retail inflation remained virtually unchanged at 4.83% last month, compared with 4.85% in March.

Food inflation surged to a four-month high of 8.7% in April from 8.52% in March, with rural consumers witnessing a sharper uptick of 8.75% in food prices. The gap between urban and rural consumers’ inflation experience remained sharp for the second successive month with rural households seeing a 5.43% rise in prices, while the overall inflation rate faced by urban consumers remained virtually unchanged from 4.14% in March to 4.11% in April.

On a month-on-month basis, price levels rose about 0.5%, with urban consumers facing a sharper uptick in overall prices as well as food items. Food prices rose 1.03% from March levels in urban India, while the rise was more subdued for their rural counterparts at 0.59%. The Consumer Price Index (CPI) was up 0.6% over March for urban households, while it was 0.37% higher for rural India.

The Reserve Bank of India (RBI) expects retail inflation to ease to an average of 4.5% this year from the 5.4% clocked in 2023-24, with the ongoing April to June quarter expected to see an average inflation of 4.9%. With April reporting a marginally lower inflation rate than the RBI’s projected average for the quarter, there could see some hardening in prices over this month and June.

The government has tasked the Reserve Bank to ensure inflation remains at 4%, with a margin of 2% on either side.

Ease in inflation helped by sharp drop in fuel and light prices

Within the food basket, vegetables’ inflation cooled marginally from 28.3% in March to 27.8%, staying in double digits for the fifth consecutive month. Pulses also reported double-digit inflation for the 11th straight month, at 16.84% in April, marginally lower than the 17.7% uptick in March.

However, inflation in cereals rose to 8.63% from 8.4% in March, while meat and fish prices hardened by 8.2% compared with 6.4% a month earlier. Fruits also reported higher price rise at 5.22%, from 3.1% in March. Egg prices were up 7.1%, lower than the 10.33% rise recorded in March.

Sugar and spices provided some succour to households’ food budgets, with the pace of price rise in the former easing below 6% in April from 7.2% in March, and spices inflation easing to 7.75% after a 22-month streak of over 10% inflation. Milk inflation also moderated to just under 3% from 3.4% in March.

The fractional easing in the headline inflation rate in April, despite the uptick in food price rise, was facilitated by a sharper drop in fuel and light prices, which were down 4.2% compared with a 3.2% decline in March, and aided by mildly lower inflation in some other items. These include clothing and footwear, pan, tobacco and intoxicants, housing, health, recreation and amusement.

The inflation in education as well as the transport and communication segments eased by about 0.5 percentage points each to 4.2% and 1.1%, respectively. However, prices for personal care and effects surged 7.5% in April, hardening from just over 6% in March. On a sequential basis, these items’ prices rose 3%.

Benign base effects from last year and this month’s above-normal temperatures and heatwave conditions could exacerbate food and beverages inflation further, which might push up the headline consumer inflation rate to a five-month high of 5.1%-5.2% in May, reckoned Aditi Nayar, chief economist at rating firm ICRA.

Among the major States, Odisha (7.05%), Assam (6.08%) and Haryana (6.06%), reported the highest inflation in April, while nine other States experienced a price rise of over 5%, including Bihar, Uttar Pradesh, Telangana, Madhya Pradesh, Karnataka and Rajasthan. In all, inflation was higher than the national average in 14 of 22 major States for which the National Statistical Office calculates inflation rates, including Gujarat (4.94%) and Kerala (4.84%).

On the other hand, consumers faced the lowest price rise in Delhi (2.29%), followed by Uttarakhand (3.58%), Maharashtra (3.66%), and West Bengal (3.68%).

A similar easing was recorded in pulses, whose prices rose 17.7% in March, 2024, from 18.5% in February.
| Photo Credit: Sushil Kumar Verma

India’s retail inflation moderated to a ten-month low of 4.85% in March from 5.1% in February, but food inflation remained sticky at 8.52%, little changed from the 8.66% recorded in the previous month as price rise accelerated in cereals and meat, while vegetables, pulses, spices and eggs remained in double-digit inflation.

While inflation for urban consumers cooled significantly from 4.8% in February to 4.14% in March, rural consumers had it harder as they experienced a slightly higher inflation of 5.45% in March compared with 5.34% in the previous month.

This trend was visible in the extent of food price rise as well, as it accelerated from 8.3% in February to 8.6% in March for rural India, while the food inflation for urban consumers dropped from 9.2% in February to 8.35% last month.

On a month-on-month basis, there was no change in the Consumer Price Index but the food price index inched up about 0.2% and economists reckoned that the ongoing heat wave could spike food inflation in coming months. Even as crude oil prices are firming up and an inflation spike in the US may delay hopes of interest rate cuts from the Federal Reserve, sticky food inflation at home could further dampen prospects of rate cuts from India’s central bank.

While March’s inflation rate is still aloof from the bank’s stated 4% target, average retail price rise in the last quarter of 2023-24 has been 5.01%, in line with the 5% average projected by the Reserve Bank of India (RBI).

The RBI, which last week called Inflation the elephant in the room that needs to return to the forest for good, expects retail inflation to ease to an average 4.5% this year from the 5.4% clocked in 2023-24. The ongoing April to June quarter is, however, expected to see an average inflation of 4.9%, as per the RBI.

Within the food basket, vegetables’ inflation cooled marginally from the seven-month high of 30.25% in February to 28.3% last month. A similar easing was recorded in pulses, whose prices rose 17.7% in March from 18.5% in February, eggs (up 10.33% from 10.7%), sugar (up 7.25% compared with 7.5% in February.

Also read | What causes inflation in India: Demand or supply issues? | Data 

However, the price rise in cereals spiked to 8.4% in March from 7.6% in the previous month, and rose to 6.4% for meat and fish, from 5.2% a month earlier. Spices inflation remained over double digits at 11.4%, moderating from 13.5% in February.

Food prices continue to be under pressure with cereals, vegetables, spices and pulses seeing high inflation and the present heat wave poses an upside risk,” said Bank of Baroda economist Madan Sabnavis, who added that recent price hikes by fast moving consumer goods firms is another monitorable.

Although inflation in household goods and services, as well as health and education, eased slightly from February levels, personal care and effects prices surged at a faster pace of over 6% in March from 5.2% the previous month.

“While core inflation continues to moderate, we remain wary of the heatwaves going ahead which could keep food inflation elevated and volatile in the summer months,” said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank. Ms. Bhardwaj expects any possible interest rate cuts only in the latter half of this fiscal year, depending on monsoons’ performance, the trajectory of crude oil prices and the timing of the US Fed’s rate easing cycle.

Rating agency ICRA expects food and beverages inflation, which was 7.8% in March, to persist over 7% in April as well. “An intensification of the impending heatwave may worsen the seasonal uptick in prices of perishables, heightening the criticality of a favourable monsoon this year to keep food inflation in check and anchor inflationary expectations,” its chief economist Aditi Nayar stressed.

Photo used for representation purpose only.
| Photo Credit: Reuters

India’s economy is expected to remain robust over the next two years even though headline growth in the country’s Gross Domestic Product (GDP) is forecast to slow from 7.6% in 2023-24 to 7% this year before improving to 7.2% in 2025-26, the Asian Development Bank (ADB) said.

In its Asia Development Outlook report released on April 11, the Bank said it expects retail inflation to ease to 4.6% this year and 4.5% in 2025-26. India’s ‘persistent’ food inflation is expected to drop to 5.7% as farm output returns to trend this year.

A projected normal monsoon this year will also help revive rural consumption. Rural consumption was muted last year due to erratic rainfall affecting the farm sector, with greater demand for work under the Mahatma Gandhi National Rural Employment Guarantee Act signalling the resultant stress.

“In India, growth is forecast to remain strong as rising consumption complements continued investment growth,” said Abdul Abiad, director of ADB’s macroeconomics research division. As India accounts for 80% of South Asia’s GDP, it is still the fastest-growing sub-region with improving domestic demand as prices moderate in most economies, he noted. South Asia is expected to grow 6.3% this year and 6.6% in 2025.

Higher incomes will spur consumer demand and confidence levels in urban consumers has improved, so demand is expected to rise from those areas with falling inflation and a gradual improvement in cities’ labour markets, the ADB reckoned. However, a rise in imports to meet domestic demand could widen the Current Account Deficit moderately to 1.7% of GDP this year and next year, it said.

India’s growth, the report said, will be driven by public and private sector investment demand and by gradual improvement in consumer demand as the rural economy improves. While exports are likely to be relatively muted this year as growth in major advanced economies slows down, they will improve in 2025-26.

“Foreign direct investment inflow will likely remain muted in the near term due to tight global financial conditions but will pick up in 2025-26 with higher industry and infrastructure investment,” the report averred.

India’s growth, the report said, will be driven by public and private sector investment demand and by gradual improvement in consumer demand as the rural economy improves. While exports are likely to be relatively muted this year as growth in major advanced economies slows down, they will improve in 2025-26.

Stressing that India’s economic outlook depends on price and financial market stability that are crucial for consumer and business confidence, the ADB said its projections face a downside risk from global shocks such as a spike in crude oil and energy prices leading to higher global inflation and tighter financial conditions.

“On the domestic side, there is a risk of underperformance in agriculture due to weather shocks that can affect demand and inflation,” it noted.

Among upside risks to its forecast, the Bank said, was faster-than-expected FDI inflow, particularly into manufacturing, which would improve output as well as productivity. “Better-than-expected global growth could boost exports and thus growth,” the ADB added.