AN ENORMOUS CHALLENGE

This is in reference to the editorial, “A lingering problem”. Amid a global economic slowdown triggered mainly by the Russia-ukraine war, everrising food and fuel prices have pushed India’s retail inflation to an eight-year high, while consumer food price inflation has shot up to its highest mark in 17 months. This underlines the enormity of the challenge the government is facing now. Making matters worse, core inflation, which factors in the costs of goods and services excluding those from the food and energy sectors, has reached a 95-month high. The going is exceedingly tough for the Indian economy, and no immediate respite seems to be in sight, raising the likelihood of another hike in repo rate by the RBI — the second in as many months. Significantly the war in eastern Europe has dashed India’s hopes of a robust economic recovery after the country seemed to have weathered the prolonged Covid storm reasonably well. Now, things are back to square one. The revival of demand and consumption, both lacklustre as of now, holds the key to putting growth back on track. Inflation has a direct bearing on the purchasing power of the people. The more they cut down on spending, the more the investor sentiment will weaken. Given the context, the government needs to tame inflation and boost consumption by providing direct benefits to the vulnerable sections while continuing the heavy lifting in terms of capital spending. Unfortunately, the World Bank has predicted that India’s GDP growth rate this year would be subdued to 8 per cent, from its earlier projection of 8.7 per cent, while the International Monetary Fund (IMF), in its World Economic Outlook report, has pegged the growth rate at 8.2 per cent, instead of 9 per cent it projected earlier. The RBI has admitted that the Indian economy is not immune to ‘negative externalities’. — KHOKAN DAS, KOLKATA via email