Indias risk of stagflation, when economic growth stagnates while prices increase rapidly, is low despite prices surging, according to the Reserve Bank of Indias (RBI) August bulletin. A study for the central bank found the probability of stagflation in India was just 3%, due to easing financial conditions, stable INR/USD forex rates and steady domestic fuel prices.
The output gap is the difference between an economy s actual output and what it can potentially produce. When the gap is positive, it can lead to demand-pull inflationary pressures
Bullish on India: Explore the India’s market, economic potential, key sectors, and investment opportunities, fiscal policies, monetary measures taken by the government and much more on Moneycontrol.
The Reserve Bank of India (RBI) has stated in its monthly Bulletin that the fight against inflation is not yet won, with monetary policy requiring to stay the course to align inflation with targets. The RBI stated that while India attained disinflation in about a year, the last mile in the journey might be the largest challenge. Food price spikes are typical with the onset of monsoon season, which pushed up headline inflation in June, further cementing the hawkish stance of the monetary policy committee.