According to an RBI advisory, extreme weather may increase the risk of inflation
The Reserve Bank said in its April Bulletin on Tuesday that extreme weather conditions and ongoing geopolitical tensions might keep crude oil prices unpredictable and provide upside risks to inflation.
The RRI’s monetary policy committee (MPC) was forced to maintain the policy and policy rates after warning that growing food prices were the primary cause of the sticky inflation at the first monetary policy review earlier this month.
The nation may see scorching conditions, according to the Met Department, which may drastically alter prices, which have just begun to decline. After averaging 5.1 percent in the two months before, retail inflation has decreased to 4.9 percent in March.
Since February 2023, the Reserve Bank, which predominantly considers CPI when determining its bi-monthly monetary policy, has maintained the key interest rate at 6.5%, citing worries about inflation, which is mostly driven by food prices.
The analysts at the central bank also said that despite the tension in West Asia, the momentum for global growth has continued in the first quarter of 2024 and that the prognosis for global trade is currently improving. Strong investment demand and positive company and consumer attitudes are supporting the trend of upward shift in real GDP growth, which is expected to continue under domestic economic circumstances, according to the report. The central bank had maintained its 7% growth projection for the current fiscal year in the April policy.
exportation of services
According to an RBI paper, the country’s services exports have grown at a robust compound annual growth rate (Cagr) of over 14% in dollar terms over the past 30 years—between 1993 and 2022. This growth is significantly higher than both the growth of 10.7% for merchandise exports and the 6.8% growth of global services exports. As a result, the country’s share of global exports has increased by more than eight times, from 0.5% in 1993 to 4.3% in 2022.
Despite global headwinds, total export earnings reached a record $776.68 billion, helping to narrow the trade deficit by 35.77% from $121.62 billion in FY23 to $78.12 billion in FY24. Services exports increased to a record $339.62 billion in FY24, up 4.4% over $325.33 billion in FY23, while merchandise shipments declined by 3.11% to $437.06 billion from $451.07 billion in FY23.
