The ministry of finance today said elevated inflationary pressures pose a challenge to the path of macroeconomic stability. The ministry added that global disruptions, along with domestic factors, may lead to elevated inflationary pressures.
It may be noted that headline retail inflation in the economy spiked to 7.4% in July 2023, with specific food commodities mainly driving the increase. "Though growth prospects have been strong, inflationary pressures have re-emerged, driven primarily by global disruptions, along with domestic factors," the ministry said in the monthly economic review for July.
"Russia's decision to terminate the Black Sea Grain deal, along with dry conditions in major wheat-growing areas, caused the price spike in cereals. While domestic factors like white fly disease and uneven monsoon distribution exerted pressure on vegetable prices in India," it added.
"Amidst global uncertainties, domestic economic activity is maintaining resilience with a healthy balance sheet of the private sector and increased capex spending of the government, crowding in private investment. However, global disruptions, along with domestic factors, may lead to elevated inflationary pressures, posing a challenge to the path of macroeconomic stability," the report said.
On the global front, as per the latest 'FAO food price index', food inflation has shown an uptick in July 2023 after a continuous decline since April 2022 (except in April 2023), the report mentioned. "The rebound in the food price index in July is mainly been driven by a sharp rise in the prices of vegetable oils (sunflower, palm, soy, and rapeseed oils) and cereals (wheat and rice)," the ministry said in the report.