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Inflationary pressures appear to be declining: Govt report – Times of India

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NEW DELHI: Overall inflationary pressures in India appear to be on a decline in the wake of the government taking pre-emptive administrative measures, initiating an agile monetary policy, and the easing of international commodity prices and supply-chain bottlenecks, a finance ministry report said on Saturday.
“In times when slowing growth and high inflation are afflicting most major economies of the world, India’s growth has been robust and inflation is in control,” said the finance ministry’s monthly economic report for August. As external pressures ease, inflationary pressures in India are also likely to subside, it said, and also highlighted several indicators that have been showing a moderating trend.
Industrial metals and edible oil prices after peaking in March 2022, have softened, led by recessionary fears in advanced economies. Crude prices have dropped 19.1% by August since their peak in June 2022. Supply chains are getting restored with decline in port congestion.
The report said the impact is already reflected in the decline in Consumer price index (CPI-C) and Wholesale price index (WPI) inflation since April 2022. While CPI inflation fell to 7% in August from 7.8% in April, WPI inflation eased from 15.4% in April to 12.4% in August.
Latest data shows that retail inflation accelerated in August on the back of high food prices, reversing a two-month downward trend, and remained above the Reserve Bank of India’s upper tolerance level of 6% for the eighth consecutive month which may prompt the central bank to raise interest rates again.
Downside risks to growth will persist as India is integrated with the rest of the world and called for strict vigil on prices, the report said. “Nor is there room for complacency on the inflation front as lower crops-sowing for the kharif season calls for deft management of stocks of agricultural commodities and market prices without unduly jeopardising farm exports,” as per the report. It said for all the hawkish central bank rhetoric, the balance sheet of the US Federal Reserve has yet to begin contracting.
The report said India’s imports are growing faster and, therefore, financing them comfortably will have to be accorded high priority. In winter months, heightened international focus on energy security in advanced nations could elevate geopolitical tensions, testing India’s astute handling of its energy needs so far.
“In these uncertain times, it may not be possible to remain satisfied and sit back for long periods. Eternal macroeconomic vigilance is the price for stability and sustained growth,” the report said. Notwithstanding the challenges, the report said India has a lot going for it, especially compared to other nations because its government chose not to pay heed to expert advice for untrammelled fiscal and monetary expansion during the pandemic years of 2020 and 2021.
“Prudent fiscal management and credible monetary policy will remain essential for India to fulfil its growth aspirations. Both these pillars of public policy will enable benchmark borrowing costs for the government and the private sector to decline, facilitating public and private sector capital formation,” it said.

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