Lok Sabha Question No. 1979 (UNSTARRED), answered on 2022-03-14
Subject: Inflation
Ministry: FINANCE
Asked by: Su Thirunavukkarasar, Dharambir Singh, Nama Nageswara Rao, Kunwar Danish Ali, Karti P. Chidambaram

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

## LOK SABHA

## UNSTARRED QUESTION NO. 1979

TO BE ANSWERED ON 14.03.2022

## INFLATION

## 1979. SHRI THIRUNAVUKKARASAR SU:

SHRI DHARAMBIR SINGH: SHRI NAMA NAGESWARA RAO: KUNWAR DANISH ALI: SHRI KARTI P. CHIDAMBARAM:

Will the Minister of FINANCE be pleased to state:

- (a)  whether inflation is increasing day by day in the country and if so, the details of average inflation rate  during  the  last  ten  years  and  the  current  year,  year-wise  along  with  month-wise  details thereof during the last two years and the current year;
- (b)  whether the retail inflation based on Consumer Price Index climbed to 6.01 per cent in January, 2022 as per the data released by the National Statistical Office, breaching the upper tolerance level of the medium-term inflation target of 4 per cent set by the Reserve Bank of India and if so, the details thereof;
- (c)  whether  the  Government  has  assessed  the  reasons  for  higher  inflation  and  if  so,  the  details thereof along with the measures taken by the Government to check the inflation;
- (d)  whether  economic  slowdown  and  decline  in  industrial  production  in  the  country  are  the  main reasons for the same and if so, the details thereof;
- (e)  the  corrective  steps  taken/  being  taken  in  this  regard  along  with  the  results  obtained  therefrom with regard to stabilizing/ reducing the prices of essential commodities;
- (f)  whether  the  Government  has  made  any  assessment  of  the  impact  of  inflation  on  demand  and supply of various consumer goods in the market and if so, the details thereof; and
- (g)  the  reasoning behind the calculation of a 3 per cent inflation rate, given that the first   advance estimates for the financial year 2022-23 indicate nominal growth to be 17.6 per cent against a real growth  of  9.2  per  cent,  which  means,  for  the  purpose  of  budget  calculations,  inflation  would actually be 8.4 per cent?

## ANSWER

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

- (a) Average inflation rate during the last ten years and the current year, year-wise along with monthwise details during the last two years and the current year are given in Annexure 1.
- (b)  Headline  inflation  rate  based  on  Consumer  Price  Index  increased  to  6.01  per  cent  in  January, 2022 as per the data released by the National Statistical Office. Headline inflation is targeted at a limit of 4% with tolerance band of +/- 2 percentage points for the period April 1, 2021- March 31, 2026. Breach of this inflation target is construed only when: '(a) the average inflation is more than the upper tolerance level of the inflation target for any three consecutive quarters; or (b) the average inflation is less than the lower tolerance level for any three consecutive quarters.' Therefore, crossing of inflation rate above the band for a particular month cannot be construed as breach of target.
- (c)  to  (f)  Inflation  of  6.01  per  cent  in  January  2022  was  on  account  of  adverse  base  effects  and increase in inflation  in  'food  and  beverages'  and  'clothing  and footwear'  categories.  Government  is keeping close watch on demand and supply of essential commodities and taking corrective action as

and when necessary. Government has undertaken several measures to keep inflation under control. Some of the measures taken by the Government include the following:

Essential  Commodities :  Price  Situation  of  major  essential  commodities  is  being  monitored  by  the Government on a regular basis and corrective action taken from time to time.

1.  Foodgrains: Public  Distribution  System  under  National  Food  Security  Act,  2013  is  providing subsidised  food  grains  at  Rs.3/kg  for  rice  and  Rs.2/kg  for  wheat  to  the  bottom  67  per  cent  of  the population (as per 2011 census) to keep the cost of living under control.

2. Pulses : (i) To ensure effective intervention during price rise through utilisation of buffer stocks, the Government  has  procured  pulses in 2020-21 and 2021-22  from farmers/farmers' producers organisations (FPOs). The target for pulses buffer in 2021-22 is at 23 LMT. (ii) To augment domestic availability  of  pulses,  Tur  and  Urad  are  kept  under  'free'  import  category  till  31st  March,  2022.  (iii) Basic import duty and Agriculture Infrastructure and Development Cess on Masur have been brought down to zero and 10 per cent respectively. (iv) 5-year Memorandum of Understanding (MoUs) have been signed with Myanmar for annual import of 2.5 LMT of Urad and 1 LMT of Tur, and with Malawi for annual import of 0.50 LMT of Tur. The MoU with Mozambique has been extended for another 5 years for annual import of 2 LMT Tur.

3.  Edible Oils: (i)  To soften the prices of edible oils, the duty on edibles oil has been reduced with effect from 14th October 2021. The basic duty on Refined palm oil/Palmolein, Refined Soyabean oil and Refined Sunflower oil has been reduced to 17.5 per cent from 32.5 per cent with effect from 14th October 2021. (ii) Futures trading in mustard oil on National Commodity & Derivatives Exchange Ltd. (NCDEX) has been suspended and stock limits have been imposed. (iii) The Department of Food and Public Distribution has imposed stock limits on Edible Oils and Oilseeds for a period up to 31st March, 2022. The Removal of Licensing Requirements, Stock Limits and Movement Restrictions on Specified Foodstuffs  (Amendment)  Order,  2021  has  been  issued  w.e.f.  8th  October,  2021.  It  has  also  been directed to ensure that Edible Oils and Edible Oilseeds stock is regularly declared and updated on the portal of the Department of Food & Public Distribution. (iv) The government is taking steps to improve the production of secondary edible oils, especially rice bran oil to reduce the import dependence. (v) In a bid to cool down the domestic prices of Soya Meal, Government has notified an Order under the Essential  Commodities  Act  to  declare  'Soya  Meal'  as  an  Essential  Commodities  up  to  30th  June, 2022 by amending the Schedule of the Essential Commodities Act, 1955. Stock limit on Soya Meal has been imposed for a period from 23rd December, 2021 up to 30th June, 2022.

Crude Oil/Petroleum Products: (i) To check the petrol and diesel prices, Central Government has reduced Central Excise Duty on Petrol & Diesel by Rs. 5 per litre and Rs. 10 per litre respectively with effect from 04.11.2021. In response many states governments have also reduced Value Added Tax on petrol and diesel. Consequently, retail prices of petrol and diesel sobered down across the country.

In  order  to  safeguard  the  interests  of  the  common  man,  retail  prices  of  diesel  and  petrol  have  not been revised since November 2021, despite the increase in global crude oil prices.

(g)  The  nominal  growth  of  Gross  Domestic  Product  (GDP)  of  17.6  percent  and  real  growth  of  9.2 percent based on First Advance estimates of National Statistical Office is for the financial year 202122.  After  assessing  the  evolving  domestic  and  external  environment,  the  Union  Budget  2022-23 projected a nominal GDP growth of 11.1 per cent for 2022-23 on the basis of certain assumptions.

## Annexure 1

## Statement referred to in Part (a) of Lok Sabha Unstarred Question No. 1979 to be answered on 14.03.2022 on 'Inflation'

| All India Annual average Inflation rate based on the CPI-C (%)   | All India Annual average Inflation rate based on the CPI-C (%)   | All India Annual average Inflation rate based on the CPI-C (%)   | All India Annual average Inflation rate based on the CPI-C (%)   | All India Annual average Inflation rate based on the CPI-C (%)   | All India Annual average Inflation rate based on the CPI-C (%)   | All India Annual average Inflation rate based on the CPI-C (%)   | All India Annual average Inflation rate based on the CPI-C (%)   | All India Annual average Inflation rate based on the CPI-C (%)   | All India Annual average Inflation rate based on the CPI-C (%)   | All India Annual average Inflation rate based on the CPI-C (%)   | All India Annual average Inflation rate based on the CPI-C (%)   |
|------------------------------------------------------------------|------------------------------------------------------------------|------------------------------------------------------------------|------------------------------------------------------------------|------------------------------------------------------------------|------------------------------------------------------------------|------------------------------------------------------------------|------------------------------------------------------------------|------------------------------------------------------------------|------------------------------------------------------------------|------------------------------------------------------------------|------------------------------------------------------------------|
|                                                                  | Base 2010=100                                                    | Base 2010=100                                                    | Base 2010=100                                                    | Base 2012=100                                                    | Base 2012=100                                                    | Base 2012=100                                                    | Base 2012=100                                                    | Base 2012=100                                                    | Base 2012=100                                                    | Base 2012=100                                                    | Base 2012=100                                                    |
|                                                                  | 2011 -12                                                         | 2012 -13                                                         | 2013 -14                                                         | 2014 -15                                                         | 2015 -16                                                         | 2016 -17                                                         | 2017 -18                                                         | 2018 -19                                                         | 2019- 20                                                         | 2020- 21                                                         | 2021-22 (Apr-Jan.)                                               |
| Inflation Rate                                                   | --                                                               | 10.21                                                            | 9.49                                                             | 5.93                                                             | 4.91                                                             | 4.52                                                             | 3.59                                                             | 3.41                                                             | 4.77                                                             | 6.16                                                             | 5.30                                                             |

Source: Ministry of Statistics and Programme Implementation (MoSPI).

Monthly Inflation rate based on the Consumer Price Index-combined (CPI-C) during the last two years (month-wise) is given in the table below.

| All India Monthly Inflation rate (Y-o-Y) based on the CPI-C (%)   | All India Monthly Inflation rate (Y-o-Y) based on the CPI-C (%)   | All India Monthly Inflation rate (Y-o-Y) based on the CPI-C (%)   | All India Monthly Inflation rate (Y-o-Y) based on the CPI-C (%)   |
|-------------------------------------------------------------------|-------------------------------------------------------------------|-------------------------------------------------------------------|-------------------------------------------------------------------|
|                                                                   | 2019-20                                                           | 2020-21                                                           | 2021-22                                                           |
| April                                                             | 2.99                                                              | 7.22*                                                             | 4.23                                                              |
| May                                                               | 3.05                                                              | 6.27*                                                             | 6.30                                                              |
| June                                                              | 3.18                                                              | 6.23                                                              | 6.26                                                              |
| July                                                              | 3.15                                                              | 6.73                                                              | 5.59                                                              |
| August                                                            | 3.28                                                              | 6.69                                                              | 5.30                                                              |
| September                                                         | 3.99                                                              | 7.27                                                              | 4.35                                                              |
| October                                                           | 4.62                                                              | 7.61                                                              | 4.48                                                              |
| November                                                          | 5.54                                                              | 6.93                                                              | 4.91                                                              |
| December                                                          | 7.35                                                              | 4.59                                                              | 5.66                                                              |
| January                                                           | 7.59                                                              | 4.06                                                              | 6.01**                                                            |
| February                                                          | 6.58                                                              | 5.03                                                              |                                                                   |
| March                                                             | 5.84                                                              | 5.52                                                              |                                                                   |

Source:  MoSPI,  Note:  *  Computed  on  the  basis  of  imputed  indices  due  to  insufficient  data  during Covid-19 pandemic. **Provisional.

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