Risk of stagflation currently in India very low
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The Reserve Bank of India (RBI) in its an article on 'State of the Economy' in the August Bulletin has said that risk of stagflation currently in India remains very low, with a probability of only 3 per cent, notwithstanding a sharp pick-up in inflation. Stagflation is the phase when an economy faces moderation in GDP growth and high inflation.
An article also underlined that in this stressed global environment, the Indian economy is gathering momentum in the second quarter of 2023-24. Domestic drivers such as private consumption and fixed investment are offsetting the drag from the contraction in exports.
Further, it said the uptick in inflation in its June reading mutated in July, with the unprecedented shock to tomato prices spilling over to prices of other vegetables. It said ‘While core inflation witnessed a moderation, headline inflation is expected to average well above 6 per cent in the second quarter. The article has been authored by a team led by Reserve Bank Deputy Governor Michael Debabrata Patra. The central bank, however, said the views expressed in the article are of the authors and do not represent the views of the Reserve Bank of India.
