The inflation in some of these items is running about three times higher than the pre-Covid levels, spurred by a combination of demand, high input prices and rupee depreciation. The inflation in shirts, trousers and coats has doubled in the current fiscal compared to the pre-pandemic period.
Prices of leather shoes or boots were up 9.9% in FY23, almost three times the average annual inflation rate between FY15 and FY20.
The cost of school uniforms rose 7.8% over last year.
Services inflation lower than goods
This compares to the average increase of 3.9% for the six years before the pandemic.”With more students moving from online to the physical platform, the demand for clothing has gone up. Alongside there has been input price pressures as well,” said Upasna Bhardwaj, chief economist, Kotak Mahindra Bank. Higher demand is allowing producers to pass on the rise in input costs.”Higher cost of inputs (cotton) and higher petroleum prices for manmade fibres has finally gotten translated. Prices were not revised for a long time, but now producers are passing on higher input costs,” said Madan Sabnavis, chief economist, Bank of Baroda.
Rahul Bajoria of Barclays attributes the high clothing inflation to cotton prices.
“Higher clothing CPI (consumer price index) inflation is due to both high domestic and international cotton prices – domestic wholesale inflation in raw cotton surged this fiscal, with average WPI (wholesale price index) inflation at 56.4% y-o-y between April and December 2022. International cotton prices too grew on average 32% in CY2022,” he said.
Higher prices of consumer electronics and automobiles are also weighing on household budgets.
The inflation in PCs and laptops is running at 8.9% in FY23 so far against 6.7% annually for the period between FY20 and FY23, and considerably higher than the compound annual growth rate of 1% between FY15 and FY20.
“The nature of the pandemic increased demand for electronics across the board and this was the time when there were significant chip shortages,” Bhardwaj said, pointing to both demand and supply side factors at play. Rupee depreciation is also a factor, Sabnavis pointed out. “All these things are imported, and the currency has depreciated 7-8% this year,” he said.
Headline inflation has remained elevated over the last year. It touched an eight-year high of 7.8% in April 2022 before easing but is still running higher than the outer bound of the RBI‘s target rate band of 2-6%.