Lok Sabha Question No. 177 (UNSTARRED), answered on 2021-07-19
Subject: Consumer Inflation
Ministry: FINANCE
Asked by: Manish Tewari

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

## LOK SABHA UNSTARRED QUESTION NO.177

TO BE ANSWERED ON JULY 19, 2021

## CONSUMER INFLATION

## 177. SHRI MANISH TEWARI:

Will the Minister of FINANCE be pleased to state:

- (a)  whether  for  nearly  a  year,  consumer  inflation,  has  been  higher  than  the  rate  of  one  year deposits by banks, effectively making the return on hard-earned tax-paid money negative and if so, the details thereof;
- (b) whether this lowering of interest rates has shown any increase in credit growth or provided a spur in investment and if so, the details thereof;
- (c) whether it is a fact that in 2021 2021, collections of indirect tax - the taxes everyone from richto-the-poor pays on consumption - is higher than taxes on income and if so, the details thereof;
- (d) whether this increase in indirect taxes is a cause of the fueling inflation and if so, the details thereof; and
- (e) whether the Government is working out on a plan to mitigate the twin burden of falling returns on savings and the rising inflation and if so, the details thereof?

## ANSWER

MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY)

- (a) The information on deposit rates of scheduled commercial banks and consumer price index (combined) (CPI-C) inflation rates since June 2020 are given in table 1.
- (b) The Reserve Bank of India has reduced its policy repo rate by 115 basis points from 5.15 per cent  in  February  2020  to  4.0  per  cent  by  May  2020.  Data  on  credit  growth  of  scheduled commercial banks (SCBs) is provided in Table 2.

Table 1: Deposit Rates and CPI Inflation

| Month     |   WADTDR (Outstanding Deposits) (%) |   CPI-C Inflation (%) |
|-----------|-------------------------------------|-----------------------|
| June-2020 |                                6    |                  6.23 |
| July-2020 |                                5.96 |                  6.73 |
| Aug-2020  |                                5.86 |                  6.69 |
| Sep-2020  |                                5.67 |                  7.27 |
| Oct-2020  |                                5.66 |                  7.61 |
| Nov-2020  |                                5.63 |                  6.93 |
| Dec-2020  |                                5.57 |                  4.59 |
| Jan-2021  |                                5.46 |                  4.06 |
| Feb-2021  |                                5.39 |                  5.03 |
| Mar-2021  |                                5.38 |                  5.52 |
| Apr-2021  |                                5.36 |                  4.23 |
| May-2021  |                                5.32 |                  6.3  |

Source: Reserve Bank of India. Note: WADTDR stands for Weighted Average Domestic Term Deposit Rate.

Table 2: Policy Rate Reduction and SCB's Credit growth (in percent)

|              |   Policy repo rate |   Banks Credit growth ( y-o-y ) |
|--------------|--------------------|---------------------------------|
| 27-Mar-2020  |               5.15 |                             6.1 |
| 26-Mar-2021  |               4    |                             5.6 |
| 02-July-2021 |               4    |                             6.1 |

Source: Reserve Bank of India

- (c) As per Department of Revenue, total collection from tax on income and through indirect taxes during 2020-21 (Prov.) is Rs. 4,86,153 crore and Rs. 10,77,256, respectively.
- (d)    The  recent  increase  in  retail  inflation  is  mainly  on  account  of  increase  in  inflation  in  food commodities.
- (e)  Government  has  taken  many  steps  to  arrest  the  rise  in  retail  inflation  in  food  items. Government has eased the import restrictions to enhance domestic availability of pulse Tur, Urad and Moong and also entered into MoUs with Myanmar, Malavi, Mozambique for pulses import. The dynamic buffer stock of pulses have been used to tackle price volatility of these commodities. Stock limits were imposed for all pulses except Moong from 2.7.2021 to 31.10.2021. Duty of crude palm oil and refined palm oil have been reduced.

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