The world economy has faced challenges in 2022 due to the lingering impact of the coronavirus pandemic and geo-political disturbances such as the Russia-Ukraine war and the Israel-Gaza conflict. These disruptions have led to price escalations in international commodity prices, causing inflationary pressures globally. In countries heavily dependent on international commodity raw materials, the escalating prices have also resulted in scarcity and higher costs of imports. Inflation rates have surged in various countries, with the US reaching 9.1% in June 2022, the UK at 11.1% in October 2022, and Italy at 11.8% in the same month.
Despite the challenges posed by inflation, India has been able to tame inflation and maintain a high growth trajectory. In April 2022, CPI inflation in India peaked at 7.8%, driven by the rising prices of crude oil and other international commodities. However, the Government of India and the Reserve Bank of India implemented effective measures to curb inflation, resulting in a significant improvement in inflation rates in subsequent months. CPI inflation decelerated to 4.83% in April 2024, showing a considerable improvement from the peak in 2022.
India has managed to soften the inflation trajectory significantly while maintaining strong economic growth. The Wholesale Price Index (WPI) inflation in India reached its highest point at 16.6% in May 2022 but gradually decreased to -0.5% in October 2023. The GDP growth rate in India is projected to be the fastest among the top ten economies, with a forecasted rate of 6.8% in 2024. India’s inflation rate of 4.8% is within the target band set by the RBI at 4-6%, showcasing the country’s resilience and economic potential.
Looking ahead, inflation trends in India are expected to normalize by September/October 2024 as kharif crops enter the food grain markets and supplement existing supplies. The proactive measures taken by the government to strengthen supply chains are expected to further soften inflation in various categories. The solid fiscal consolidation path and the conscious effort to stabilize the inflation trajectory will enhance India’s appeal to global investors and strengthen its economic attractiveness on the global stage. Overall, India’s ability to effectively manage inflation while sustaining growth underscores its potential and stability in the midst of global economic challenges.
