Persistent inflation will hurt growth

Persistent inflation will hurt growth

Subject – Economy

Context – GDP growth for the second quarter of the current fiscal has come in at 8.4 per cent, up from a contraction of 7.4 per cent in Q2 of 2020.

Concept –

• The inflation rate, officially measured as headline Consumer Price Index – Combined, or CPI-C, (base 2012), comprising food, fuel and services, has been continuously above the average of 4 per cent since October 2019. T
• his exceeds the target upper ceiling mandated in the Flexible Inflation Targeting (FIT) framework in force for the period March 31, 2021 through March 31, 2026.
• We exclude food and fuel inflation (as these are sensitive to exogenous factors) from the headline retail inflation to arrive at what is called core inflation to gauge the persistence of inflation.

To know more about inflation, please refer August 2021 DPN.

To know about Headline Inflation vs Core Inflation, please refer November 2021 DPN.