The Lok Sabha elections have concluded, ushering in a new NDA government with Narendra Modi assuming the role of Prime Minister for a third consecutive term. Amidst the election fervor, a pressing issue looms large for the citizens, particularly middle-class families: a significant surge in wholesale inflation, which has reached its highest level in 15 months.
India's Wholesale Price Index (WPI)-based inflation surged to a 15-month high of 2.61% in May.
Increase in prices of food articles
The positive rate of inflation in May 2024 is primarily due to increase in prices of food articles, manufacture of food products, crude petroleum and natural gas, mineral oils and other manufacturing, the ministry of commerce and industry says in a statement.
In April, wholesale inflation stood at 1.26%, up from 0.53% in March 2024 and 0.20% in February 2024.
The wholesale inflation in primary articles surged to 7.2% year-on-year in May compared with 5.01% in April.
Data released on June 14 shows that wholesale inflation spiked to 2.61 percent in May. Prior to this in February 2023, the inflation rate was 3.85 percent.
Furthermore, April 2024 witnessed a wholesale inflation rate of 1.26 percent, marking a 13-month high, up from 0.53 percent in March 2024, and a mere 0.20 percent in February. In contrast, retail inflation has seen a decline.
Triple dose of price hikes
With the elections now over, the focus shifts to combating inflation. The first Monday of June brought a significant blow to consumers, with a triple dose of price hikes. Major milk producers, Amul India and Mother Dairy, increased milk prices, and the National Highways Authority of India (NHAI) raised toll rates by 5 percent.
Experts predict that inflationary pressures will intensify with the new government's formation. This surge in inflation, affecting both food and essential commodities, has raised concerns among the populace.
Middle-Class Struggles: Rising Expenses, Stagnant Incomes
Examining the financial landscape over the past few years reveals a troubling trend for Indian households, particularly the middle class. Expenses have been rising consistently, while income growth has lagged behind. This disparity has led to a continuous decline in savings.
According to recent data from the Ministry of Statistics and Programme Implementation, net household savings have been on a downward trajectory for the past three years, plummeting to Rs 14.16 lakh crore in the financial year 2022-23.
Net household savings decline
The latest National Account Statistics 2024 from the Ministry indicate that net household savings peaked at Rs 23.29 lakh crore in the financial year 2020-21. However, since then, there has been a persistent decline, with savings dropping to Rs 17.12 lakh crore in the financial year 2021-22. This figure represents the lowest level of household savings in the past five years. The primary factor behind this decline is the rising cost of living and increasing household expenses.
As the new government takes charge, addressing the inflation crisis becomes crucial. The middle class, already burdened by high expenses and dwindling savings, looks to the government for relief and sustainable economic policies. The challenge lies in balancing inflation control with economic growth to ensure that the benefits of development reach all strata of society, particularly those struggling to make ends meet amidst soaring prices.
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