Retail Inflation has been one of the major points of worry in India for the economic weaker section. Which of the following factors has led to non-rising core retail inflation in India?

Solution

Industry, throughout the year, has thus faced high input costs imported into the country. Fearing demand impact, the industry has been gradually passing on the higher production costs, which has led to sticky but non-rising core retail inflation. Non-core retail inflation, on the other hand, comprising food and energy components, has been declining as local weather extremities have eased and interventions by the government to restrict price rises have proven effective. Strong external demand also served the Indian industry well in FY22 when manufactured exports soared, responding to a rebound in global growth. Trade had also recovered and grown as bottlenecks in global supply chains eased. Indeed, an increase in investment demand has emerged as another powerful stimulus to industrial growth. It has been triggered by a jump in the Capex of the central government in the current and the previous year as compared to the pre-pandemic years. The leap also has crowded-in private investment, already upbeat on the pent-up consumption demand, export stimulus, and strengthening of the corporate balance sheets. The eight core industries of coal, fertilisers, cement, steel, electricity, refinery products, crude oil, and natural gas are critical in meeting the demand for inputs across industries. The growth in these industries has held steady, reflecting a broad momentum in industrial activity. Their growth underscores the importance that nations have been attaching to the indigenous presence of core capacities in the aftermath of the pandemic and the Russia-Ukraine conflict breaking down the global supply chain. The manufacturing landscape shows uneven growth across various categories. For example, the motor vehicles manufacturing segment’s performance continues to improve, induced by robust demand and an easing of chip shortage. The manufacturing of ‘computer, electronic and optical products’, an upcoming industry, has also been rising. Multiple players looking to make India a manufacturing hub of semiconductors have made the investment outlook in this sector positive. Production of coke and refined petroleum has also increased, fetching high returns in a global market where crude oil prices were higher than in FY22.