Stagflation risk in India remains low despite recent jump in prices: RBI bulletin – Times of India
The RBI in its monthly bulletin also said that the Indian economy is gathering momentum in the second quarter, though inflation would continue to average above the central bank’s comfort zone of 6 per cent.
“Stagflation risk remains low for India with a probability of only 3% with easing of financial conditions, stability of the INR/USD exchange rate and steady domestic fuel prices,” a study conducted by the central bank showed.
India’s retail inflation in July jumped to 7.44 per cent from 4.87 per cent in June, mainly due to soaring prices of tomato, vegetables and other food items.
High-frequency food price data for August so far shows prices of cereals and pulses continued to increase this month, according to the bulletin. Tomato prices, on average, registered a further increase, although more recent data indicates some pullback in prices, the RBI said.
Onion and potato prices also registered sequential upticks. Retail selling prices of petrol and diesel in the four major metros remained steady in August so far (up to 14th). While kerosene prices increased sharply, LPG prices have been kept unchanged in August so far, it said.
“While core inflation witnessed a moderation (in July), headline inflation is expected to average well above 6% in the second quarter,” RBI wrote.
Earlier this week, Prime Minister Narendra Modi said the government will be taking more measures to tackle inflation so as to minimise the burden of price rise on people.
In his address to the nation on the 77th Independence Day, Modi said the world is grappling with high inflation, and when India imports goods, it also imports inflation. “The world is yet to fully recover from the impact of Covid pandemic. The war has created yet another problem. The world is grappling with the problem of inflation. Inflation has gripped the global economy,” the Prime Minister said.
With assembly elections due in key states and the Lok Sabha elections next year the government will be making efforts to control inflation.
(With agency inputs)
