Rising international commodity prices are the most important risk arising from the ongoing conflict, according to the current FICCI economic outlook survey, because Russia and Ukraine are worldwide providers of critical goods.
According to the assessment, if the conflict continues, it will wreak havoc on supplies of primary raw resources such as crude oil, natural gas, food, fertilisers, and metals.
India, on the other hand, is unlikely to escape untouched. Given that India is still a net importer of energy, the dramatic rise in oil prices has a substantial impact on India’s macroeconomic framework. Furthermore, if the conflict continues, the economic impact is projected to be more severe, according to the poll findings.
Inflation, according to the participants, is still the most major danger for India. Rising crude oil prices are projected to have a negative influence on India’s macroeconomics. According to the research, a spike in oil prices, along with a dramatic drop in the value of the rupee, is increasing India’s import bill, contributing to the country’s current account stress.
According to the survey’s economists, fiscal policy should be prioritised at this time, and inflationary pressures could be alleviated through excise cuts/subsidies. As inflationary pressures mount, this will be critical in protecting private consumer expenditure.
According to the source, there was a unified view on monetary policy that the Reserve Bank of India will avoid from undertaking policy reversal in the upcoming monetary policy to be announced on April 8, 2022.
The Reserve Bank of India, on the other hand, was expected to continue to support the ongoing economic recovery by maintaining the policy repo rate steady at its April meeting. Consumer confidence has remained muted and has yet to return to pre-pandemic levels, according to the survey.
Crude oil and industrial input prices are soaring, putting pressure on consumer expenses through imported inflation. Despite the fact that the transit to consumers has been limited thus far, experts anticipate a pass through the next fiscal year.
Participants in the survey expected the RBI to reconsider its attitude in the second half of the current fiscal year (2022), with a rate hike of 50-75 basis points by the conclusion of the fiscal year.