Price pressure to remain elevated for some time but latest spike in food inflation transitory: FinMin
finance ministry said on Tuesday, even as it expected the latest spike in food inflation to be “transitory” on the back of steady farm sector performance, fresh arrivals in the market and the government’s “pre-emptive measures” to boost essential supplies.
Nevertheless, in its monthly economic report for July, the department of economic affairs (DEA) called for greater vigilance by both the fiscal and monetary authorities on the price front. It, however, pointed at the emergence of “green shoots of a private capex upcycle”, adding that the government’s persistent emphasis on budgetary capital spending in recent years is now crowding in private investments, as evident in the performance of various high-frequency indicators and industry reports.
Domestic consumption and investment demand are expected to continue to spur economic growth, it said.
The report stated that the maintenance of macroeconomic stability is paramount to keep interest rates from rising too much and to maintain steady economic growth. This would underscore the “relative attractiveness of India as a zone of performance and promise for domestic and international investors”.
“In the given circumstances, policies that contribute to the maintenance of macroeconomic stability constitute macroeconomic stimulus,” it added.
This is particularly important at a time when stock prices have started correcting as sovereign bond yields have risen in much of the advanced world in August. Also, geopolitical and geo-economic concerns have not abated, and they may be “an enduring reality for quite some time”, he added.
Rural demand sustained sequential momentum in the June quarter, as reflected in the sales of fast moving consumer goods and two-and-three-wheelers.
