The Reserve Bank of India (RBI) in its‘ State of the economy’ report advised that the surging commodity prices are causing inflation risks, especially through the surging of imports. The ever- growing widening of current and trade account poverties along with the portfolio capital outflows is putting pressure on external sustainability despite the fact that the underlying fundamentals and the stock of international reserves are providing buffers.

Overview

  • In March, retail inflation has gone up to6.95 percent.
  • The inflation in food and beverages rose to7.5 percent in March from5.9 percent in February was the main driver of retail inflation.
  • According to the report, the country is also reeling from the global crisis caused due to the Russian invasion of Ukraine.
  • Due to the war and related retaliatory sanctions are causing a rise in affectation.
  • The repo rate was kept unchanged by the RBI in the April monetary policy review but it has initiated the normalization process of the accommodative policy.
About near- term global outlook
According to the report of the RBI, the near- term global outlook appears to be quite grim as it has been caught up in a whirlpool of geopolitical risks that has rapidly materialized, the fast pace of the normalization of the monetary policy, along with strained supply chains.

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