Consumer price index (CPI) based inflation has printed outside the Reserve Bank of India’s (RBI) comfort zone of six per cent. It came in at 6.3 per cent in May and 6.26 per cent in June. The RBI has taken the stance that this round of inflation is being caused by supply-side issues. Due to the pandemic, manufacturing and services activities have got disrupted, causing shortages of both goods and services.
Not everyone agrees with this point of view. Some economists and fund managers are of the view that there are certain causes for inflation that are likely to be sticky. As a result, inflation may not come down as quickly as the central bank would have us believe. Take two examples. The global rally in commodities has driven their prices up and no one can tell when this will end. The price of crude oil, which has also moved up in recent months, will only end if the major oil-producing nations decide to ramp up supply. But there is no visibility on whether they will do so. Hence, participants within the debt market are increasingly of the view that inflation is likely to be persistent.
Denne historien er fra August 2021-utgaven av Investors India.
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Denne historien er fra August 2021-utgaven av Investors India.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
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