The Economic Survey 2021-22 has flagged imported inflation as a risk due to high energy prices globally. The economic survey has said that India does need to be wary of imported inflation, especially from elevated global energy prices. It further added that the consumer price rise has reappeared as a global issue in both advanced and emerging economies.
India’s Consumer Price Index (CPI) inflation stood at 5.6 per cent in December 2021 which is within the targeted tolerance band. Wholesale price inflation, however, has been running in double-digits, the report said.
The Survey said that the economy is well placed to take on the challenges of 2022-23. Further, the Economic Survey 2022 has highlighted that due to benign food inflation in most of the year, the headline inflation remained in check.
“The Consumer Price Index inflation remained range-bound as food prices eased considerably due to the supply management response by the Government. Food inflation remained benign during the year at 2.9 per cent (April-December) as against 9.1 per cent in the corresponding period last year,” the Survey highlighted. The survey said that wholesale inflation was high due to the base effect and will even out but supply-side constraints globally are likey to put pressure on it.
Rumki Majumdar, Economist, Deloitte India, said: “Throughout the pandemic, high inflation has been the result of supply-side disruptions, which did not require the RBI to intervene proactively. This may change going forward as the economy recovers. India must brace for higher inflation with a strong possibility of pent-up demand exceeding supply and geopolitical tensions resulting in higher commodity prices. Disruptions in the global supply chain will further add to the challenge.
Recent spikes in inflation have also concerned policymakers in the United States and European Union, where a strong rally in demand has been met with supply constraints because of global supply chain disruptions and shortages. India will also experience the same, Majumdar added.
The Economic Survey 2021–22 tabled by finance minister Nirmala Sitharaman in the Lok Sabha has pegged FY23 Indian GDP growth in the range of 8 per cent-8.5 per cent even as it has cautioned on the “uncertain” global environment on account of a new Covid-19 variant, and the rising global inflation and liquidity withdrawal.
“With the vaccination programme having covered the bulk of the population, economic momentum building back, and the likely long-term benefits of supply-side reforms in the pipeline, the Indian economy is in a good position to witness GDP growth of 8.0-8.5 per cent in 2022-23,” the survey says.
The Indian economy is estimated to grow by 9.2 per cent in real terms in 2021-22 (as per the First Advance Estimates), after a contraction of 7.3 per cent in 2020-21. Growth in 2022-23 will be supported by widespread vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and availability of fiscal space to ramp up capital spending.
All macro indicators indicated the economy was well placed to face challenges, helped by pick-ups in farm and industrial output growth, said the report.
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