The consumer price index climbed 4.5% in October, from a year ago, but the rise in the cost of living for most households might have been far higher than captured by the headline inflation based on the consumer price index. Expectedly, higher prices of petroleum products and edible oils hurt the most, but prices of several other essential goods and services also climbed higher due to the pass-through of higher input costs by manufacturers.
It’s not that prices suddenly spiked in October, manufacturers have been increasing retail prices at intervals through the current fiscal year to protect margins that came under pressure from a rise in prices of commodities, higher transportation costs and supply bottlenecks.
In the five months after the peak of the second wave, or June-October, the headline inflation climbed 5.2% over the same period last year. Most manufacturers chose to absorb higher costs instead of raising prices last year due to a fear of hurting demand.
The rise in inflation for edible oils in October 2021 was as sharp as that for petroleum products. It was led by nearly a 48% rise in mustard oil, a popular cooking medium in northern and eastern parts of the country. At the retail level, its prices climbed from about Rs 130 a litre last October to about Rs 185 a litre last month on average.
Hydrogenated vegetable oil or vanaspati rose 42% while popular refined oils extracted from oilseeds such as sunflower and soyabeans climbed 39%, from the same month a year ago. The prices of edible oils were affected by several factors including a lower global output of oilseeds earlier in the year, a sharp rise in the demand for soyabeans from China and lower output of palm oil due to labour shortages in Malaysia.
Among other essentials, households paid more for tea leaves in October compared to a year ago. However, tea leaf prices have started moderating after climbing for several months, a point that companies such as Tata Consumer Products made in their quarterly results commentary recently. The index for tea was almost 14% higher in October.
Households have also been facing higher inflation from toiletries such as soaps and toothpaste, as manufacturers passed through higher input costs in the past few months. The index for toilet soaps climbed about 9% in October.
The prices of consumer durables and other electric goods have also been rising, affected by higher prices of metal, plastics and cables, shortage of semiconductors and supply chain disruptions. Thus, the index for television sets was about 14% higher in October and washing machines and other household appliances 10% higher. Pots and pans, particularly those made of stainless steel, have also been climbing with the rise in metal prices.
Clothing and footwear prices too rose, with a sharper increase seen for relatively cheaper products such as rubber and PVC footwear, dhotis and lungis and towels. All of them climbed 8-9% in October. However, the sharpest rise was seen for second-hand clothes, with the index for October 2021 printing 13% higher than a year ago.
The price index for second-hand clothes had fallen to its lowest in more than five years by December 2020, when demand for such clothes slumped due to widespread distress among the poorer sections of society. While the index for such clothes has recovered since then, it is still below the pre-pandemic level.
The rise in the food price index composed of unprocessed and processed food - was relatively mild at 0.8% in October, but some pulses such as masur recorded about a 13% rise.
Going forward, the cut in excise duty and value-added taxes on petrol and diesel will provide some relief in November.
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