Russia's attack on Ukraine may burn a hole in your pocket too, daily items' prices set to rise
India Today
Even as adverse spillovers through direct trade remain limited, the Russia-Ukraine war may have a significant impact on inflation through the global commodity markets channel, the RBI said.
Food prices are surging globally, including in India, as the war in Ukraine blocks crop supplies to push inflationary pressure on the consumer pocket. Taking cues from the global situation, the Reserve Bank of India today raised the inflation forecast for the current fiscal year by 20 basis points to 5.7 per cent.
“The Russia-Ukraine conflict poses considerable upside risks to prices of key food items," RBI said in its Monetary Policy report on Friday. Even as adverse spillovers through direct trade remain limited, the Russia-Ukraine war may have a significant impact on inflation through the global commodity markets channel, the central bank added.
The apex bank also clarified that the inflation trajectory would depend critically on the evolving geopolitical situation and its impact on global commodity prices and logistics.
After easing to 4.3 per cent in September 2021, retail inflation rose in the following months to reach 6.1 per cent in February 2022, driven mainly by the increase in food inflation. Retail prices of vegetables, cereals, and edible oils are already at elevated levels.
The retail price of tomatoes rose 36.2 per cent, vanaspati oil 26.42 per cent, masoor dal 19 per cent, potatoes 17.7 per cent, and onions 11.2 per cent year-on-year as of April 7.
While prices of food items have jumped in India, the inflation still looks benign compared to many other regions in the world. The global food price index rose sharply to a record high in March 2022. The food price index shot up 12.7 per cent last month, according to the Food and Agriculture Organisation (FAO). Food prices are primarily pushed by expensive cereals.
The Eurozone recorded a lifetime high inflation rate of 7.5 per cent, while Turkey, Mexico, and Ireland recorded inflation rates that have been the highest in the last two decades. Prices in Spain, Belgium, and Germany rose at a rate faster than that recorded in the last 35 years.
