Global uncertainty may keep inflation elevated: Sitharaman

New Delhi: Global uncertainty and domestic disruptions may keep inflationary pressures elevated in coming months, the finance ministry said, adding that this warrants greater vigilance by the government and the Reserve Bank of India.

India’s retail inflation, as measured by the Consumer Price Index, jumped to a 15-month high to 7.44% in July from 4.87% the preceding month, with food inflation at its highest in 39 months because prices of vegetables, cereals and pulses spiked.

“Monsoon rains in August have been deficient at the time of writing,” the ministry said in its latest monthly economic review, hinting at persistent supply-side uncertainties. Adverse geopolitical developments could put pressure on food prices globally, it said.

Fresh supplies of farm produce and the government’s timely measures would soften food inflation, the July review, added. “The government has already taken pre-emptive measures to restrain food inflation which, along with the arrival of fresh stock, is likely to subside price pressure in the market soon.”

Elevated inflationary pressures may pose a challenge to macroeconomic stability as food inflation has shown an uptick globally in July after a continuous decline since April 2022 (except in April 2023), the review cautioned.

The impact of global disruptions was clearly evident in India’s inflation numbers, the report said. “Headline inflation spiked to 7.4% in July 2023, with specific food commodities mainly driving the increase, while core inflation stayed at a 39-month low of 4.9%,” it said. Cereals, pulses and vegetables saw double-digit price growth in July compared to the corresponding period last year, it added.

Pointing at the adverse impact of global headwinds on India’s merchandise exports, it said the external sector requires monitoring for further strengthening the prospects in the face of active pursuit of industrial policies globally.

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