Global and regional uncertainties and domestic disruptions may keep inflationary pressures elevated in India for the coming months, the Finance Ministry said in a report released Tuesday.
“Going forward, while domestic consumption and investment demand are expected to continue driving growth, global uncertainty and domestic disruptions may keep inflationary pressures elevated for the coming months, warranting greater vigilance by Government and the RBI,” the Department of Economic Affairs wrote in its July issue of Monthly Economic Review.
Notably, retail inflation in India has surged to 7.4 per cent in July from 4.9 per cent in June. The latest rise in inflation could partly be attributed to the current spurt in tomato and other vegetable prices across India. The rise in tomato prices is reported across the country, and not just limited to a particular region or geography. In key cities, it rose to as high as Rs 150-200 per kg.
Domestic factors like white fly disease and uneven monsoon distribution exerted pressure on vegetable prices in India, the ministry said. Monsoon rains in August have been deficient in the country, it added.
The ministry expects tomato prices to decline with the arrival of fresh stocks by the end of August or early September. Further enhanced imports of tur dal are expected to moderate pulses inflation, the report said.
The ministry noted that India’s core inflation reading has remained at a 39-month low.
On the trade front, the ministry feels the external sector warrants a closer watch to strengthen merchandise export growth in the face of slowing global demand, even as services exports are expected to continue performing well.
Going forward, the ministry said, downside risks to global stock markets on account of rising bond yields and anticipation of further monetary tightening do affect stock markets in emerging economies.
“Maintenance of macroeconomic stability may be returning as an important policy objective after about a year of relative abatement of macroeconomic headwinds,” it said.
