Lok Sabha Question No. 1765 (UNSTARRED), answered on 2018-07-27
Subject: Impact of Inflation on Growth Rate
Ministry: FINANCE
Asked by: SHARAD TRIPATHI

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA UNSTARRED QUESTION NO. 1765

TO BE ANSWERED ON JULY 27, 2018

## IMPACT OF INFLATION ON GROWTH RATE

† 1765. SHRI SHARAD TRIPATHI:

Will the Minister of FINANCE be pleased to state:

- (a) the details of rates of inflation during the last six months and its impact on the growth rate of the economy;
- (b) the effect of inflation on demand and prices in the market;
- (c) whether the retail prices of edible items are increasing at the higher rates than the comprehensive rate of inflation; and
- (d) if so, the reasons therefor and the efforts being made by the Government to control increase in prices?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PON RADHAKRISHNAN)

- (a)  &  (b):  Inflation  based  on  Consumer  Price  Index  -  Combined  (CPI-C)  during  the  last  six  months  is presented in Table 1:

| Table 1: Inflation (in per cent) based on Consumer Price Index - Combined (CPI-C)   | Table 1: Inflation (in per cent) based on Consumer Price Index - Combined (CPI-C)   | Table 1: Inflation (in per cent) based on Consumer Price Index - Combined (CPI-C)   | Table 1: Inflation (in per cent) based on Consumer Price Index - Combined (CPI-C)   | Table 1: Inflation (in per cent) based on Consumer Price Index - Combined (CPI-C)   | Table 1: Inflation (in per cent) based on Consumer Price Index - Combined (CPI-C)   | Table 1: Inflation (in per cent) based on Consumer Price Index - Combined (CPI-C)   |
|-------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|
|                                                                                     | Jan-18                                                                              | Feb-18                                                                              | Mar-18                                                                              | Apr-18                                                                              | May-18                                                                              | Jun-18 (P)                                                                          |
| CPI - C                                                                             | 5.1                                                                                 | 4.4                                                                                 | 4.3                                                                                 | 4.6                                                                                 | 4.9                                                                                 | 5.0                                                                                 |

Note: P - Provisional.

GDP growth of  a  country  depends  on  a  number  of  factors  viz.  structural,  external,  fiscal  and  monetary factors. Hence, it is difficult to pinpoint the impact of inflation on the growth of the economy. Other things remaining the same, inflation resulting in higher prices, would tend to reduce the consumption, which is a major component of aggregate demand in the economy.

- (c) & (d): Food inflation has been lower than headline inflation in 2017-18 and first quarter of 2018-19 as shown in Table 2.

| Table 2: Inflation (in per cent) for Food (CFPI) and Headline (CPI-C)   | Table 2: Inflation (in per cent) for Food (CFPI) and Headline (CPI-C)   | Table 2: Inflation (in per cent) for Food (CFPI) and Headline (CPI-C)   |
|-------------------------------------------------------------------------|-------------------------------------------------------------------------|-------------------------------------------------------------------------|
|                                                                         | 2017-18                                                                 | 2018-19 Q1 (P)                                                          |
| Food Inflation: Consumer Food Price Index (CFPI)                        | 1.8                                                                     | 2.9                                                                     |
| Headline Inflation: Consumer Price Index - Combined (CPI-C)             | 3.6                                                                     | 4.8                                                                     |

Note: P - Provisional.

The Government has taken a number of measures to control inflation especially food inflation which, inter alia, include regular review meetings on price and availability situation at the highest level, a dynamic buffer stock  of  pulses  upto  20  lakh  tonnes,  appropriate  market  interventions  under  Price  Stabilization  Fund  to control price volatility of agricultural commodities as and when required.