BackNo room for complacency on the inflation front: Finance Ministry
In the next three quarters of the current year, India’s real GDP needs to “grow by (only) 5.4%” on average every quarter to achieve the growth rate of 7.2 per cent in 2022-23 as projected by the RBI.
PremiumBENGALURU: There is no room for complacency on the inflation front, cautioned the ministry of finance in the Monthly Economic Review for August, while noting that inflationary pressures in India appear to be on a decline. It said that lower crop sowing for the kharif season calls for “deft management" of stocks in agri commodities and market prices.
It said that India’s growth has been robust and inflation in control, however, “Downside risks to growth will persist insofar as India is integrated with the rest of the world."
It added that inflationary pressures in India appear to be on a decline with a preemptive set of administrative measures by the government, agile monetary policy and easing of international commodity prices and supply-chain bottlenecks. India is in a better position to calibrate its liquidity levels without abruptly stalling growth, it said.
India, Asia’s third-largest economy, recently overtook the United Kingdom to become the world’s fifth largest ((based on quarterly GDP results in the current dollars for the period ending December 2021). India is also the fastest growing major economy so far, estimated to grow by 7.2% in the current fiscal.
In the next three quarters of the current year, India’s real GDP needs to “grow by (only) 5.4%" on average every quarter to achieve the growth rate of 7.2 per cent in 2022-23 as projected by the RBI.
“While persistently high liquidity may partly explain the stubbornness of inflation in advanced economies, inflation in India, a net commodity-importing country, has been a by-product of externally situated exogenous pressures," said the report.
It added that an increase in international prices was reflected in an uptick in domestic prices, though the increase in domestic prices was relatively modest on account of the timely interventions taken by the government. Further, as these external pressures ease, inflationary pressures in India are also likely to subside, it added.
India’s retail inflation, measured by the consumer price index reverted to the 7% mark in August after easing to a five-month low in July. However, wholesale inflation eased to an 11-month low of 12.41% in August, as non-food and fuel inflation showed signs of easing,
With “bright" growth prospects, India’s imports are growing faster and, therefore, financing them comfortably will have to be accorded high priority, said the report. “In winter months, heightened international focus on energy security in advanced nations could elevate geopolitical tensions, testing India’s astute handling of its energy needs so far," it said.
“In these uncertain times, it may not be possible to remain satisfied and sit back for long periods. Eternal macroeconomic vigilance is the price for stability and sustained growth," added the report.
The contact-intensive services sector is likely to drive growth in 2022-23 building on the pent-up demand released following the absence of a pandemic wave in the first quarter and near universalization of vaccination thus far, said the report.
The surge in private consumption may also be a reflection of the increasing effectiveness of income support and targeted subsidies provided by the government, creation of jobs from elevated levels of public sector capex, and general rise in employment levels, it added.
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