A day after the government reported higher inflation numbers, the Finance Ministry said high fuel and commodity prices pose a risk to inflation and growth outlook.
Data released by the National Statistical Office on Monday underlined that retail inflation based on Consumer Price Index (CPI) is an eight-month high of 6.07 per cent. On the same day, Commerce & Industry Ministry said that wholesale inflation, also known as producers’ inflation, based on Wholesale Price Index (WPI) surged to 13.11 per cent, which is 11th successive month of double digit number.
Related Stories
Gloomy outlook on the economy front
Too many shocks have hit the global economy. Though India is better placed, there are many uncertainties aheadOn Tuesday, Monthly Economic Review, prepared by Economic Affairs Department, said that average CPI inflation till February stands at 5.4 per cent continuing to remain inside the range of RBI’s Monetary Policy Committee target (2-6 per cent). Further, inflation expectations have been moderated as indicated by RBI’s recent inflation expectation survey of households.
An upside risk
“Going forward, elevated energy and commodity prices may act as an upside risk to the inflation outlook in the near- medium term,” it said. Further, it mentioned that given the inherently unsustainable nature of high prices, international commodity prices are expected to level off early with increase in supplies outside the crisis zone. For the coming fiscal year 2022-23, RBI has projected CPI inflation at 4.5 per cent with risks broadly balanced. However, “recent increase in prices of food and energy commodities and metals warrants continued vigil on the inflation front,” it said.
Talking about overall economy, the report highlighted that GDP growth rate of 5.4 per cent during October-December quarter is reflective of a strong growth momentum, which has been aided by rapid vaccination coverage and accommodative monetary and fiscal policy support. It did acknowledge that recent geopolitical developments have introduced an element of uncertainty into the economic growth and inflation outlooks in the new financial year.
However, “the budget with its capex orientation and prudent assumptions along with strong macroeconomic fundamentals will support growth and provides a floor to it amidst global political turmoil and likely higher volatility in financial markets,” it said.
The report said that external sector exhibits sign of resilience with robust growth in merchandise exports increasing to $374.8 billion during first 11 months of current fiscal, covering 93.7 per cent of the target set for Financial Year 2021-22. Further, “the economy is well prepared with adequate forex reserves to absorb any upcoming external shock in terms of capital outflow induced by uncertain geopolitical environment,” it said.
Capital expenditure
It expressed optimism with Centre’s endeavours to enhance capital expenditure will further boost the growth and employment through multiplier effect. Resultantly, Moody’s Investors Service has upgraded the India’s GDP growth estimate to 8.4 per cent for 2022-23, while Fitch Ratings has projected the growth at 10.3 per cent for 2022-23. “Recent sharp increase in the price of crude oil, if sustained well into the new financial year, will pose downside risk to these growth estimates,” it said.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.