Multiple Factors Add Inflationary Pressure In Economy

India’s headline inflation continues to remain elevated at 6.8% in Oct 2022 with price pressures witnessed in food basket. In the recent months multiple factors have been adding inflationary pressure in the economy such as – demand recovery, rupee depreciation, crop damages due to extended monsoon increasing the food prices etc. At this rate, inflation continues to be above the RBI’s upper tolerance limit.

Currently, India’s domestic macroeconomic fundamentals are strong compared to its global peers. The sustenance of domestic demand provides enough cushioning for the RBI to continue with its rate hikes to control inflation. In the months ahead moderation in food prices due to new harvest in the winters, along with base effect would bring down the inflation print statistically. However, we are cautious of the price pressure that could emanate from external factors resulting in sharp rupee depreciation and effects on the Indian economy.”