Congress general secretary in charge of communications, Jairam Ramesh.
| Photo Credit: Shiv Kumar Pushpakar

RBI headquarter
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The Fed has missed its long-term 2% target for inflation for more than five years, and U.S. households have been battered by the high prices. File
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For Mahalakshmi R., who has been riding a bike taxi for nearly two years, every increase in fuel and food prices directly cuts into her daily earnings. What was once enough for three modest meals a day is no longer sufficient. “I earn an average of ₹700 to ₹1,000 each day, depending on the number of rides. I spend around ₹200 on fuel for my vehicle. Earlier I could manage food expenses within ₹250 a day. Now I skip meals because the prices of everything have gone up. Even idlis cost much more now,” she says, as she waits for the next ride request.

As fuel costs climb and food becomes increasingly unaffordable, fresh concerns over a possible return to large-scale work-from-home arrangements have added another layer of uncertainty for drivers like her, whose livelihoods depend entirely on people commuting to office each day.

From Chennai to the southernmost districts of Tamil Nadu, rising food prices are steadily tightening household budgets, with restaurants and eateries quietly revising menu rates upward every few weeks. The burden on the public has intensified further with hikes in fuel prices — thrice in 10 days. On Saturday (May 23), the Union government increased the prices (petrol: ₹105.31 and diesel: ₹96.98 in Chennai). This increase came after a hike of ₹3 on May 15 and 90 paise on May 19. The availability of LPG cylinders continues to remain a concern, with several consumers reporting delivery delays stretching up to two weeks in certain cases.

Takeaway troubles

From middle-class families and bachelors to hostel students and information technology professionals dependent on daily takeaways, people across Tamil Nadu say the cost of putting food on the table has risen sharply, even as incomes and salaries have largely remained stagnant.

“Ever since the LPG supply crisis began, small restaurants and roadside eateries have been among the worst affected. Larger food chains with multiple outlets across the State were able to manage the situation better owing to their scale and supply networks. However, these major brands were also the first to increase food prices and reduce portion sizes. Smaller eateries have followed suit only in the past two weeks,” said a food consultant.

In Triplicane, a Chennai neighbourhood with a large number of men’s mansions housing job seekers and migrant workers, residents say their daily food expenses have increased by ₹50 to ₹125 in recent weeks. Many who moved to the city in search of employment say affordable food was one of the reasons they chose to stay in mansions despite their cramped living conditions. “We stay in mansions because it helps us cut down on room rent and manage our expenses better. But eating has now become more expensive than lodging,” said Rajavel, a resident of a mansion in the locality. Men living in mansions across the State face the same crisis.

Young professionals and Gen Z employees working in the IT sector say rising travel and food expenses are beginning to strain their monthly budgets. Archana, a software professional employed at a small IT firm along Chennai’s Old Mahabalipuram Road (OMR), said recent workplace changes added to her financial burden. “After Prime Minister Narendra Modi’s announcement encouraging work-from-home, our company reduced its employee transport services and asked the staff members to arrange commute on their own. Now, I must bear my daily travel expenses too,” she said. According to industry experts, the State has over 10 lakh people working in the IT sector, including many from other States.

Silent surge

A cooking oil industry source said that in the past few days, the prices of cooking oils, including palm and sunflower oils, had gone up by ₹15 a litre. Amid rumours that excise duty on cooking oil imports would be increased, there has been panic buying and hoarding. “Since countries that mainly supply cooking oil to India, including Malaysia and Indonesia, have diverted their excess stocks to make biodiesel, the nation’s supplies too are likely to be hit. They too want to conserve foreign exchange by not buying crude oil. If crude prices go down, the price of palm oil too will go down,” he said. Besides homes, palm oil is mainly used in the hotel industry for cooking and making snacks.

Salem Shevapet Maligai and Shop Varthaga Nala Sangam president S.C. Natarajan said that owing to favourable seasonal rainfall, the prices of most grocery items remained stable, with only a few commodities witnessing an increase of ₹5 to ₹10 a kg. Compared with March this year, the price of ‘toor dal’ has increased from ₹125 to ₹130 a kg, while Bengal gram has risen from ₹85 to ₹90 a kg. The price of roasted gram has also gone up from ₹90 to ₹100 per kg, he added.

Firewood cost rising too

Hotels that shifted from LPG to firewood are now grappling with rising firewood cost too. With demand for ‘seemai karuvelam’ (Prosopis juliflora) increasing sharply, the prices have risen from ₹6,000 to ₹13,000 per tonne, Madurai-based wholesale trader A. Karthikeyan said, adding that his customer base had grown from 50 to 70 since the gas shortage began.

Peanut hulls, another alternative biofuel widely used by sweet shops in the region, have also become costlier following the LPG price hike. Known for generating the intense heat required for continuous boiling of sugar syrup, the fuel is commonly used in sweet-making units. M. Kannagaraj, a sweet shop owner in Madurai, said the price of a 30-kg gunny bag of peanut hulls had risen from ₹240 to ₹280. He feared the price might increase further if LPG rates continued to rise.

Rising prices of essential commodities, LPG, and fuel have been affecting the operations of parotta shops in Tiruchi’s Edamalaipatti Pudur area. Shops that once started preparing parottas from early afternoon have begun staggering cooking schedules to optimise the use of gas cylinders and firewood stoves. Residents say the impact is already visible in food prices. “Not long ago, a parotta cost ₹10. It rose to ₹15 earlier this year and now sells for ₹25. Today, buying six parottas costs more than the gravy that accompanies them,” said a resident of Edamalaipatti Pudur.

Cloud kitchens, which rely heavily on app-based food orders, are also facing mounting pressure amid the rising operational cost and shrinking profit margins. Tiruchi alone has nearly 250 cloud kitchens, and several of them are reportedly on the verge of shutting down, according to S. Sundaresan, district secretary of the Tiruchi Hotel Association. “Subscription-based meal services have been among the worst hit by the price rise because we cannot increase rates after customers have already paid their monthly fee. At best, we may have to reduce the number of deliveries or impose a surcharge on future subscriptions,” said S. Siva of Mukkani Tiruchi, a fresh-cut fruits and salads subscription service. Several women, particularly those running cloud kitchens and subscription-based food services across the State, fear that the continuing rise in the fuel and raw material costs could severely affect their already modest monthly savings and threaten the sustainability of their businesses.

Delivery workers in trouble

Food and e-commerce delivery workers say the steady rise in fuel prices is pushing them deeper into financial stress, even as their earnings remain stagnant. Many complain that while the cost of petrol continues to rise, companies have done little to offset the burden on gig workers. “There are far more delivery workers now than there were two years ago, but the number of bookings we receive has reduced sharply. Our incomes have remained the same while fuel expenses keep increasing,” said a delivery executive, expressing concern over the growing struggle to sustain daily expenses.

Many consumers say the new government must urgently intervene to regulate soaring food prices, accusing sections of the hotel industry of increasing rates at the slightest excuse while rarely reducing them when commodity prices fall. “Hotel associations are always quick to cite rising costs and hike prices, but when market prices come down, customers never see any reduction on their bills. The common man is being squeezed from all sides. Someone must step in and control these arbitrary price hikes,” they said.

Supplies stretched

An expert on LPG said that only 60%-70% of the requirement was at present bottled at the plants owing to the reduction in supplies. “There were times when bottling plants worked to fill up 120% of bookings and distributors still had backlogs. At present, the oil marketing companies (OMCs) seem to be stretching whatever supplies of LPG they have. In urban areas, though booking is allowed after 25 days as opposed to 45 days in rural areas, it takes nearly 40 days for the cylinder to reach the customer. It is the same with rural consumers.”

Distributors say they get only one load of bottles where two are needed. OMCs have been saying they have enough stock and there is no need to panic, but they are not permitting new 14.2-kg domestic connections because diversions happen rampantly. “This is mostly done by the delivery boys with the connivance of a few distributors,” said an oil industry source.

(With inputs from Sabari M. in Salem and Namakkal; Nahla Nainar and Ancy Donal Madonna in Tiruchi; P.V. Srividya in Krishnagiri and Hosur; S.P. Saravanan in Erode; Beulah Rose in Madurai; and Deepa Ramakrishnan in Chennai.)

Continuous days of sustained losses has seen the rupee close at almost ₹97 to the dollar, with no indication that the slide has been arrested. Rising oil prices and the threat of external inflation will put further pressure on the rupee in the days to come. This has prompted calls for intervention to prevent further falls.

Some writers, like Harvard professor Gita Gopinath, have resisted calls for intervention by the RBI, advocating for letting the rupee find its own level. A weaker rupee would automatically curtail imports and boost exports. Intervention would only obstruct the free flow of market forces.

While intervention does have its challenges, there is danger in letting the process of depreciation continue unabated, especially when much of it is being driven by speculative finance. With foreign interest rates bound to rise, capital will flow out faster, leading to stronger negative pressures on the rupee. In such a scenario, it might take inordinately long for the rupee to ‘find its level’, and the inflationary dangers of a weak rupee will exert even more stresses on a populace already exposed to hardship as a result of worldwide spikes in energy prices.

Can intervention deepen volatility?

A current account deficit implies more imports than exports, and hence a greater need for foreign currency. If this is adequately met by foreign capital inflow to purchase assets like stocks, the rupee’s value relative to the dollar will not change.

If the economy experiences a deficit without sufficient inflow of foreign capital, it faces a problem, with demand for foreign exchange exceeding available supply. Mainstream models dictate that in such a situation, the rupee must depreciate. The weaker rupee makes exports more affordable and imports more expensive, leading to an automatic adjustment of the current account deficit relative to the available inflow of foreign capital.

In such a scenario, intervening to artificially prop up the value of the rupee only delays the inevitable. It inhibits adjustment by ensuring import demand does not fall, because the rupee has not depreciated enough to naturally shut off higher import demand, the cause of the widening deficit in the first place.

What is the difference between a weak rupee and a falling rupee?

Arguments for non-intervention, however, conflate a falling rupee with a weak rupee. A fall in the rupee value would not automatically increase export demand if the market expects a further fall. Exports might be higher when the rupee is weak, but may not rise when the rupee is falling if foreign buyers expect the price to fall even further and for goods to become cheaper at a later date.

At the same time, if the economy imports essential goods like oil, demand may not automatically reduce sufficiently as the rupee falls. If people expect the rupee to fall further, and for the prices to rise even more tomorrow, they may front-load purchases today and increase import demand in the short run. This can be seen in the rush to buy petrol when prices were raised, as consumers expected further increases in the future.

A falling rupee would see higher import values, but no necessary increase in exports, ensuring that the deficit is not curtailed. The very problem that required a depreciation might just perpetuate itself. One might argue that exports would pick up and imports reduce when the process eventually works itself out. But the adjustment process is rarely painless. Rising import values of essential goods will lead to rising inflation in the domestic economy that has already experienced reverse migration and real wage squeezes.

What is the role of capital flows?

For the sake of argument, one can posit an equilibrium value of the rupee driven by fundamental values, such as export and import demands that exhibits uniform and predictable behaviour as the rupee changes value. The process may be long, but the economy might eventually settle at this value, driven by fundamental changes in the current account. However, this assumption neglects the role of speculative foreign capital.

Much of the fall in the rupee has been driven by speculative outflows of foreign institutional investment that, for whatever reason, does not see Indian assets as being sufficiently remunerative. Perhaps investors think returns on Indian stocks will not be high in the future, that growth is not sustainable, or that interest rates will rise in developed country markets. Whatever the reason, these speculative expectations of foreign investors can lead to capital outflow and depreciation, necessitating current account adjustments based on the sentiments of foreign investors.

In such a situation, the ‘actual’ value of the rupee is determined not by consumption demand but by speculation. There are no fundamentals or technical values underpinning the pure speculation of financial markets. With indications that foreign Central Banks may soon raise interest rates, the rupee could come under further pressure.

Intervention is one amongst many policies that must be considered, and one that even developed economies have resorted to. As the yen slid against the dollar in April this year, Japanese Finance Minister Satsuki Katayama signalled that the government would take ‘decisive action’ in financial markets to maintain the yen. This announcement did lead to the yen recovering some losses initially after the announcement, though it continues to lose ground due to limited actual intervention.

Intervention to stem speculative capital flows is extremely hard to manage, and can lead to negative outcomes if the force of speculation is too great, or if governments do not – or cannot – show enough commitment in markets. However, we must not assume that the rupee can find an equilibrium value soon, for its fall is being driven by speculation rather than any fundamental economic behaviour. It is time to have a serious conversation regarding the role and place of foreign capital in India’s growth story. 

(Rahul Menon is associate professor at O.P. Jindal Global University.)

Published – May 22, 2026 07:30 am IST

Ranjit K. Jain
| Photo Credit: Special Arrangement

 According to WPI data, deflation in food articles was 4.16%in November, compared to 8.31% in October. File.
| Photo Credit: Reuters

By staying patient, informed and disciplined, you can break the loop of ‘artificial demand’ and avoid inflated prices. Allow time for the situation to settle. File.
| Photo Credit: Reuters

Union Finance Minister Nirmala Sitharaman speaks in the Rajya Sabha during the Budget session of Parliament, in New Delhi, Thursday, Feb. 13, 2025.
| Photo Credit: PTI

Food prices are expected to be under control in the coming year, going by advance estimates of crop output, but the government will keep monitoring prices and act to ensure that ordinary citizens are not burdened by inflation, Union Finance Minister Nirmala Sitharaman told the Rajya Sabha on Thursday.

Responding to members’s concerns about high inflation during the discussion in the House on the Union Budget 2025-26, Ms. Sitharaman said the latest Consumer Price Index (CPI) showed price rise eased to 4.31% in January from 5.22% in December and is now close to the Reserve Bank of India (RBI) target of 4%.

“So there’s a steep correction, particularly in potato, onion, and tomato prices, which are key components in the CPI food basket, and additionally, the decline in pulses inflation, supported by tariff-free imports for the pulses we don’t adequately produce domestically for our consumption. As per the RBI’s report of February 7, CPI inflation for 2025-26 is projected to average only 4.2%,” she said.

Before outlining the Budget’s steps to boost output in the farm sector, including targeted interventions for pulses, vegetables, fruits, and high-yielding seeds, Ms. Sitharaman said that food inflation gets triggered “when you have an adverse weather condition and supply chain disruptions”. A Group of Ministers (GoM) is overseeing the situation so that timely imports happen when there is a supply shortfall.

“With the first advance estimates of agricultural production of 2024-25 being what it is, kharif food grain production is expected to rise 5.7% and the production of rice and tur dal is expected to increase by 5.9% and 2.5%, respectively, compared to 2023-24. So the prices of food will be well under the inflation radar, with the kind of advance estimates which we are getting, but despite that, the GoM will be keenly monitoring,” the Minister said.

With the economy expected to grow 6.4% this year, the Budget aims to accelerate growth, secure inclusive development, invigorate private sector investments, uplift household sentiments, and also directly or indirectly enhance the spending power of the rising middle class, Ms. Sitharaman said.

Stressing that the Budget has been made during a “very difficult time” when external challenges are “very severe” and beyond the realm of projections or predictions, the Minister cautioned that this immense uncertainty is still playing out and many Indian imports critical for the economy are also going to be mired in uncertainty.

The world’s economic order is seeing a major change from what used to be the mantras of recent decades, she said, pointing to globalisation being marred by fragmentation, fiscal prudence being hit by the rising debts of countries, and multilateral bodies getting diluted and not exerting themselves while bilateral and regional forums are calling the shots. “Everybody wants a global free market situation but you have aggressive tariff and non-tariff barriers, when it comes to their interests,” she underlined.

“But despite that, we have tried keeping the assessments as close as possible to what can develop, keeping India’s interests topmost… we are trying to make sure that the Budget somewhat at least foresees all this, and is ready for such eventualities,” she said. Ms. Sitharaman said, thanking the more than 90 MPs who spoke in the discussion.

Image for representative purpose
| Photo Credit: PTI

India’s industrial output growth dropped to a four-month low of 3.2% in December, with manufacturing and mining sectors rising just 3% and 2.6%, respectively, and consumer non-durables’ production slipping 7.6% from a year ago.

The National Statistics Office (NSO) also downgraded the industrial production growth assessment for November 2024 to 5% from 5.2% estimated earlier. Despite the weaker growth number relative to the previous month and December 2023, when factory output had risen 4.4%, the Index of Industrial Production (IIP) was at a nine-month high.

At 157.3 points, the IIP was 6.1% over November, and reflected the strongest output levels in financial year 2024-25. The Manufacturing as well as the Mining sectors recorded their best index reading this year.

Electricity generation was up 6.2% year-on-year and 4.7% over November 2024 levels.

Five of six industrial segments based on the end-use of products recorded an uptick in December, led by capital goods (up 10.3%) and consumer durables (8.3%). Infrastructure and construction goods rose 6.3, while intermediate goods and primary goods grew 5.9% and 3.8%, respectively.

Consumer non-durables remained a worry, with production shrinking 7.6% in December and the mere 0.6% growth estimated for November being revised downward to 0.4%. However, absolute output levels were at an 11-month high in December and 5.1% over November.

Within manufacturing, 16 of 23 industry groups recorded growth in December, with electrical equipment (up 40.1%), basic metals (up 6.7%), and coke and refined petroleum products (rising 3.9%), making the most significant contribution to growth. Based on end-use classification, the top three contributors to growth in December were primary, intermediate and infrastructure/construction goods.