India’s worrying inflation crisis

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Editor's note: Inflation is back as a hot-button topic. Prices of a range of essential items continue to defy gravity, adding to the pain and misery unleashed by the COVID-19 pandemic. What makes matters worse is that while goods and services are becoming more expensive, economic growth is nowhere to be seen, which means our pockets aren’t getting any deeper.  In May, retail inflation as measured by the Consumer Price Index grew to 6.3% from 4.3% the previous month. The Wholesale Price Index, on the other hand, scaled to 12.94% from 10.5% in April. This level of retail inflation is now above the Reserve Bank of India’s targeted 2%-6% band. Alarm bells should have been ringing by now but there is little that the RBI can do.  Last week, we pointed out how it was caught in a trap of maintaining high levels of liquidity and low interest rates to spur credit growth and economic activity, and raising rates to check inflation. That excuse isn’t enough to evade responsibility and all eyes will be on the central bank’s next monetary policy meeting …