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India is better placed than many other countries to avoid the risk of stagflation amid an increasing hostile external environment, according to the Reserve Bank of India.
The state of the economy article published in RBI’s June bulletin noted that global economic conditions continue to deteriorate as surging commodity prices and financial market volatility lead to heightened uncertainty.
“In the midst of this increasingly hostile external environment, India is better placed than many other countries in terms of avoiding the risks of a potential stagflation. With most constituents of GDP surpassing pre-pandemic levels, domestic economic activity is gaining strength," said the paper.
Stagflation is a situation where both inflation and unemployment are high, while demand remains stagnant.
With a growth rate of 8.7% in 2021-22, India’s gross domestic product (GDP) surpassed its pre-pandemic (2019-20) level by 1.5% and the recovery remains robust in 2022-23 so far, the article said.
“The recovery remained broadly on track," it said, demonstrating “the resilience of the economy".
