Page 567 - ES 2020-21_Volume-1-2 [28-01-21]

194 Economic Survey 2020-21 Volume 2

 The rural-urban difference in CPI inflation, which was high in 2019, saw a decline in 2020.
Since November 2019, CPI-Urban inflation has closed the gap with CPI-Rural inflation. Food
inflation has almost converged now, however, divergence in rural-urban inflation is observed in
other components of CPI like fuel and light, clothing and footwear, miscellaneous etc.

 CPI headline and most of its sub groups inflation from April-October 2020 was mostly driven
by substantial increase in price momentum, possibly due to the initial disruptions caused by
COVID-19 lockdown. By November 2020, price momentum has moderated significantly for
most sub groups and coupled with positive base effect helped ease inflation.

 During 2019-20 (Apr-Dec) as well as 2020-21 (Apr-Dec), the major driver of CPI-C inflation
was the food and beverages group. Its contribution has increased to 59 per cent in 2020-21 (Apr-
Dec) compared to 53.7 per cent in 2019-20 (Apr-Dec).

 Thali cost have increased between June 2020 and November 2020, they witnessed a sharp fall in
the month of December reflecting the fall in the prices of many essential food commodities.

 State wise trend shows that CPI-C inflation increased in most of the states in the current year.
However, regional variation persists. Inflation ranged between 3.2 per cent to 11 per cent across
States/UTs in 2020-21 (Jun-Dec) compared to (-) 0.3 per cent to 7.6 per cent in the same period
last year.

 Food inflation has been driving overall CPI-C inflation due to the relatively more weight of
food items in the index. While food habits have undergone revisions over the decade since
2011-12 (base year of CPI), the base year of CPI needs revision. Further, in the context of
increasing e-commerce transactions, it is important to include such new sources of price data for
the construction price indices.

 Steps were taken to stabilise prices of food items like banning of export of onions, imposition of
stock limit on onions, easing of restriction on imports of pulses etc.
 Apart from the short-term measures to curtail the upward price movement, we need to invest
in medium to long-term measures such as decentralised cold storage facilities at production
centres. Good storer varieties, judicious use of fertilizers, timely irrigation and post-harvest
technology are essential to reduce the losses in stored onions (Operation Greens portal). Review
of onion buffer stock policy is also essential. System needs to be developed to reduce wastages,
efficient management and ensure timely release.

 Consistency in import policy also warrants attention. Increased dependence on imports of edible
oils poses risk of fluctuations in import prices and imports impacting production and prices of
domestic edible oil market, coupled with frequent changes in import policy of pulses and edible
oils adds to confusion among farmers/producers and delay in imports.

 Gold prices saw sharp spike as investors turned to gold as a safe haven investment amid
COVID-19 induced economic uncertainties. Compared to other assets, gold had returns during
the year that were considerably higher.