Don’t let people slip back into poverty: fiscal and monetary policy must work in tandem to shield the vulnerable

Subscribe to enjoy similar stories.In a reminder that the inflation beast is never fully tamed, but can at best be forced to retreat temporarily, wholesale price inflation in India jumped to a 42-month high of 8.3% in April. That’s more than double the previous month’s 3.9% and a far cry from the 0.9% recorded a year ago. The longer global oil supply remains disrupted, the likelier it will go into double digits.And with diesel and petrol filling-station prices hiked only in May (and more hikes likely), it is just a matter of time before retail inflation, already at a 13-month high of 3.5% in April, increases.

The government can absorb some of the Gulf war’s impact on household budgets, but not all. Add to all this the fear of El Niño conditions and sub-par monsoon rains impacting food supplies, and there’s no getting away from cost-of-living worries across the country in the foreseeable future.India is not alone in this. Globally, prices are heating up.

In the US, retail inflation at 3.8% in April is the highest since May 2023. The UK’s March figure is 3.3%. Both are above their 2% target.

Bond yields have risen in tandem: US 10-year Treasuries now yield 4.6%, the highest since last May, while the yield on 30-year bonds rose above 5.1%, its highest closing level since July 2007. The yield on India’s 10-year government securities is nearing 7.2%, the highest since end-April 2024. The April edition of the International Monetary Fund’s World Economic Outlook warns that global headline inflation is expected to rise to 4.4% in 2026 before declining to 3.7% in 2027, an upward revision for both years.