India’s inflation rate, which has recently declined to 4.9% in March, could face upward pressure in the near term due to potential risks posed by extreme weather events and geopolitical tensions. The Reserve Bank of India (RBI) has identified these factors as potential threats to the country’s disinflation trajectory in its monthly bulletin’s ‘State of the Economy’ article.
According to the article, authored by RBI Deputy Governor Michael Patra and other central bank officials, adverse weather conditions, such as those projected for the summer months, could disrupt food supply chains and lead to price increases. The World Meteorological Organization (WMO) has also issued a red alert about global warming, warning that there is a high probability of 2024 becoming the hottest year on record.
Additionally, geopolitical tensions and the resulting volatility in crude oil prices have the potential to further strain India’s inflation outlook. The RBI has noted that prolonged geopolitical conflicts could keep oil prices elevated, contributing to inflationary pressures.
Despite these risks, India’s economic outlook remains positive, with the RBI projecting continued growth in 2023-24. The article emphasizes the need for strong private investment and sustained public capital expenditure to support this growth trajectory and help India achieve its developmental aspirations.
The RBI’s assessment highlights the complex challenges facing India’s economy. While the country seeks to contain inflation, it must also navigate global headwinds and ensure that economic growth remains on track.
