India has a chance to escape global inflation trap: RBI
MUMBAI: Inflation pressures may be peaking in India, putting it on track to be the world’s fastest growing economy, according to the central bank.
India’s economy is showing signs of resilience despite fears of recession and war globally, the Reserve Bank of India said in a monthly bulletin late Saturday. Stronger agricultural activity and a pick-up in manufacturing and services point to a highgrowth trajectory over the medium-term, it said.
If recent moderation in commodity prices and an easing of supply chain pressures continue, “the worst of the recent surge in inflation will be left behind, enabling the Indian economy to escape the global inflation trap,” the bank said.
“There are sparks in the wind that ignite the innate strength of the economy and set it on course to becoming the fastest growing economy in the world,” according to the bank.
India’s wholesale inflation eased from a three-decade high in June due to softening in prices of raw materials including crude and edible oils.
Higher recent rainfall and an increase in sowing activity is “raising expectations that rural demand will soon catch up with urban spending and consolidate the recovery,” the bank said.
India’s June-September monsoon rains were 13% above average as of July 16, after hitting a deficit of 18% on June 17, according to India Meteorological Department.
While the rupee depreciation has impacted the current account deficit and fuelled inflationary pressures, it has, at the same time, made Indian exports more competitive said experts.
“The depreciation of the rupee has multiple impacts on the economy. Given we have a negative trade balance, though a depreciation of the rupee makes our exports more competitive, our import bills go up significantly,” said Ranen Banerjee, PwC India.