Sources told NDTV that along with inflation, there is also a threat of stagflation.
“The inflation threat is turning into a baseline scenario,” sources told NDTV.
A day ahead of April retail inflation, sources told NDTV that the Reserve Bank of India’s inflation forecast will be revised higher in the June policy review.
Last week, after an emergency meeting, the RBI hiked its key interest rates to fight runaway inflation, even as it admitted that it would take India several years to recover the economic output loss from the pandemic. .
Until last month, the central bank was focused on supporting the nascent economic recovery from COVID-19-led restrictions on business activity, but has since shifted its policy plans to contain rising inflation.
While the Russia-Ukraine war has heightened those growth concerns, it has also caused runaway inflation globally, distorting supply chains that were already disrupted by coronavirus-led lockdowns.
This points to the technical definition of stagflation – high inflation and slow economic growth together.
A Reuters report shows that Morgan Stanley has lowered its forecasts for India’s economic growth over the next two fiscal years, saying a global slowdown, rising oil prices and weak domestic demand will make Asia’s third largest economy. Will take a toll on the largest economy.
On Wednesday, people familiar with the matter told NDTV that along with inflation, there is also a threat of stagflation.
“In the words of the Egyptian-American economist, ‘the threat of inflation is turning into a global baseline scenario’,” the sources said.
And he added that “there are no tools globally against stagflation.”
Still, sources said, “aiming to get rid of all pandemic-led policy measures.”
RBI Governor Shaktikanta Das last week gave plenty of time to prove that the off-cycle hike was a reversal of an emergency rate cut as a pandemic-support measure.
But rising inflation is a matter of concern for RBI at this time.
A Reuters poll of economists on April’s retail price report showed inflation – based on the consumer price index – accelerated to 7.5 percent in March, compared to a 17-month high of 6.95 percent a year ago.
And if the Reuters poll consensus of 7.5 per cent is realized, it would mark the highest inflation rate since October 2020 and be above the RBI’s upper limit of its 2-6 per cent target band for the fourth consecutive month.
The forecast in that survey of 45 economists for the data, due to be released on May 12 at 1200 GMT, was between 7.0 percent and 7.85 percent, underscoring expectations for a higher figure than any economist has expected. No pencil. March Inflation Rate
General expectations suggest that the April report may be peak, but inflation is likely to remain elevated.
Food inflation, which accounts for nearly half of the consumer price index basket, is already at several months high on account of higher vegetable and cooking oil prices and is likely to remain at those levels.