India’s finance ministry expects easing global commodity prices along with monetary and fiscal measures to curb inflationary pressures going ahead, according to its monthly economic report.
“In the absence of any further shocks, the downward movement of global commodity prices along with the RBI’s monetary measures and the government’s fiscal policies are expected to cap inflationary pressures in the coming months,” the finance ministry said.
The sustained decline in crude oil prices and easing in inflation below 7 percent as well as growth in tax collection have contributed to a significant easing of concerns over growth and inflation in the current financial year, it added.
However, risks remain with the geopolitical environment tense and fraught, which could trigger fresh supply concerns in the winter for critical commodities such as crude oil and natural gas.
Globally, inflation is still stubbornly high and without more policy tightening, it might not drop to around 2 percent to 3 percent in the developed world, the finance ministry said.
“It is not necessarily the right thing to do to project either optimism or pessimism too far ahead in these uncertain times. For now, India looks better placed on the growth-inflation-external balance triangle for 2022-23 than it did two months ago,” it added.
With India’s inflation spiking sharply this year, the central bank has tightened monetary policy swiftly over the last three months while the government has taken a raft of supply-side measures.
Retail inflation – the rate-setting panel’s key price gauge - has been above the inflation target of 4 percent for 34 consecutive months and outside the 2-6 percent tolerance range for seven straight months.