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Inflation data released on July 12 had shown that headline retail inflation rate increased to 4.81 per cent in June from 4.31 per cent in May primarily due to a sharp increase in food inflation to 4.49 per cent from 2.96 per cent.
The Indian economy’s domestic dynamics continue to be strong though negative cross-border spillovers and adverse global developments can act anytime as a deterrent to achieve the potential high growth path in the current financial year, the Finance Ministry said on Thursday in its monthly economic review for June 2023. The ministry also pointed out that though inflation has “significantly declined” in June quarter, the recent spike in the prices of ‘fruits,’ ‘vegetables,’ and ‘pulses and products due to weather-related disruptions has led to a sequential increase in food inflation in June 2023, emphasising the need for a “guarded approach by RBI and the government”.
“In the case of India as well, inflation has significantly declined in the June 2023 quarter compared to the corresponding quarter last year and has entered the tolerance band of the RBI. The core inflation has also been softening since the beginning of the June 2023 quarter, indicating a restoration of overall price stability in the economy. However, the recent spike in the prices of ‘fruits,’ ‘vegetables,’ and ‘pulses and products owing to weather-related disruptions has led to a sequential increase in food inflation for the month of June 2023. As inflation has been reined in only recently while threats of supply-side shocks, including El Nino, persist, the RBI and the government continue to be guarded for appropriate and timely policy response,” the review stated.
Inflation data released on July 12 had shown that headline retail inflation rate increased to 4.81 per cent in June from 4.31 per cent in May primarily due to a sharp increase in food inflation to 4.49 per cent from 2.96 per cent.
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The ministry also noted that the Reserve Bank of India (RBI) maintains its policy rates at levels higher than a year ago and is closely monitoring the possible impacts of global and domestic shocks on the prices in India. “Given the volatility associated with inflation levels, it is seen that the policy rates in other major economies, especially Advanced Economies (AEs), in the June 2023 quarter are significantly higher than a year ago. Amidst the downside risks of sudden emergence of global demand or supply shocks, such as the collapse of the Black Sea Grain Deal in July 2023 or the recent increase in the price of Brent crude, and persistently sticky core inflation, the central banks continue to portray a hawkish stance to bring inflation down to their respective targets. The RBI also maintains its policy rates at levels higher than a year ago, closely monitoring the possible impacts of global and domestic shocks on the prices in India,” it said.
On the growth front though, the report said, despite a rise in global uncertainties and moderation in global output, India’s growth momentum gathered in the last quarter of the previous fiscal is likely to be sustained in the June 2023 quarter, as reflected in the performance of various high-frequency indicators including GST collections, PMI, services exports, e-way bills etc.
It stated that the July 2023 update of the World Economic Outlook has revised India’s growth for 2023 (FY24) to 6.1 per cent, up from 5.9 per cent in the April report, while maintaining the growth projection for 2024 (FY25) at 6.3. “Be that as it may, negative cross-border spillovers and adverse global developments can act anytime as a deterrent to achieving the potential high growth path in the current financial year,” it said.
© The Indian Express (P) Ltd
First published on: 04-08-2023 at 00:28 IST
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