Taming inflationary pressures

15 NOV,2021 | MEDC


 

India’s economy could face inflationary pressures in the medium term. That may pose policy problems. The good news is that inflation continues to remain within the RBI’s comfort zone (2% to 4%). The reappointment of the RBI Governor for another three year term also shows that policy continuity matters, and that both the Central Bank and the Finance Ministry are largely on the same page. But the IMF has raised its inflation forecast for India to 5.6% for this fiscal, from the 4.9% estimate in April, citing growing global inflationary risks. The silver lining is that export growth remained high at 22.6% in September. This shows that there is still a strong demand for Indian exports. However, imports rose by 85%, partly due to higher oil prices. Given India’s adverse terms of trade, policymakers need to tread carefully.

*Photo Credit: Google

 

 

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