Why Not Relate Retail Inflation to Affordability?

 Why Not Relate Retail Inflation to Affordability?

This refers to the news report “Retail inflation eases to 6-year low of 2.1% in June.” While this may seem like a welcome development for the RBI, Government of India, and sections of the public, especially those securely employed and economically well-positioned, it deserves a more nuanced analysis.

There’s no denying that the RBI’s calibrated monetary policy has started yielding visible results—reflected in declining inflation at wholesale, retail, and consumer levels. Achieving a retail inflation figure far below the RBI’s 4% CPI target is indeed a policy milestone. However, one must ask: does this headline number truly reflect the lived reality of the average citizen?

The reduction in food and consumer prices, while statistically significant, doesn’t necessarily translate into improved cost of living, lower production costs, reduced interest rates, or a broad-based rise in consumption demand. For these benefits to materialise and sustain, affordability across income segments needs to improve. Without parallel improvements in employment, income generation, and socio-economic infrastructure, reduced inflation may remain a largely academic achievement.

Moreover, the broader economic environment—marked by volatile international tariffs, inconsistent domestic taxation policies (notably irrational GST structures), and weak governance—continues to hinder the transmission of macroeconomic gains to the ground level. In such a setting, low inflation may not stimulate the desired uptick in investments, productivity, or employment generation.

A meaningful policy approach would involve correlating year-on-year inflation changes to income levels and affordability metrics, especially for the lower- and middle-income groups. This would help paint a more accurate picture of economic well-being and guide future interventions aimed at inclusive growth.

In particular, sectors like consumer durables and tourism, which have the potential to spur employment and demand, require that people not only have money to spend but also access to reliable infrastructure: safe and affordable transport, quality accommodation, and accountable public services. Without these, even low inflation cannot catalyze the economic vibrancy that India aspires to.

Ultimately, inflation must be viewed not in isolation, but in relation to people’s purchasing power and quality of life. Only then can economic growth be both sustainable and equitable.

Sarve Jana Sukhino Bhavanthu.

T V G Krishnan .

(Personal Views)