The Reserve Bank of India was right not to cut policy rates and India isn’t really immune to happenings in the global marketplace—that was the message between the lines in the Economic Survey for 2007-08, a year when the economy is expected to grow by 8.7%, down from 9.6% the previous year. Inflation is rising again, and the Economic Survey said that growing global inter-linkages have created a pass-through effect, where trends in international commodity prices are beginning to be reflected in domestic commodity markets. However, the survey added that inflation would remain at moderate levels. The Economic Survey has also pointed out the increase in per capita incomes here, although it is silent on the growing consumption inequality in the country.
Better supply management, including through imports, will be the key to managing inflationary pressures. Local manufacturers have responded by raising capacity, but agriculture has been unable to do that due to several structural constraints.