Economic Review: Global uncertainty and domestic disruptions to sustain high inflation

The review highlighted the government's proactive steps to curb food inflation, anticipating relief as fresh stock arrives to alleviate price pressures.

New Delhi: Although domestic consumption and investment demand are expected to continue driving growth, global uncertainty and domestic disruptions may keep inflationary pressures elevated for the coming months, warranting greater vigilance by the Centre and the RBI, says the monthly economic review released by the Finance Ministry on Tuesday.

The review noted that the government has already taken pre-emptive measures to restrain food inflation which, along with the arrival of fresh stock, is likely to subside price pressure in the market soon. At the same time however, it added that the external sector requires monitoring for further strengthening the prospects in the face of active pursuit of industrial policies globally.

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“Services exports continue to do well and are likely to continue doing so as the preference for remote working remains unabated, typically manifested in the proliferation of global Clcapability centres,” the review said.

But the same time, from a medium- term perspective, it is important to monitor the impact of new technologies, such as Artificial Intelligence, on the external demand for Indian services exports and the consequent impact on employment, the review emphasised.

The review further said that there are downside risks to global stock markets on account of rising bond yields and anticipation of further monetary tightening do affect stock markets in emerging economies.

“Maintenance of macroeconomic stability may be returning as an important policy objective after about a year of relative abatement of macroeconomic headwinds,” it observed.