India's Inflation Rate May Decline To Around 5 Per Cent By March Next Year: SBI Research Report

India's Inflation Rate May Decline To Around 5 Per Cent By March Next Year: SBI Research Report

by Swarajya Staff - Jul 14, 2022 11:08 AM +05:30 IST
India's Inflation Rate May Decline To Around 5 Per Cent By March Next Year: SBI Research ReportInflation (Representative image)

The likelihood of a global recession in the current situation is only 20-30 per cent, instead the chance of prolonged stagflation seems more, according to State Bank of India research report Ecowrap's latest edition.

The report projects that India's inflation rate is likely to come closer to 5 per cent by March 2023.

"Globally, high inflation has been a worrying factor across the world. Both demand (owing to pandemic related fiscal stimulus) as well as supply factors (supply issues causing high commodity and food prices) are being responsible for higher prices," the report said.

"Out of 299 commodities in headline CPI basket, 200 could be categorised as supply driven and the rest 99 as demand side factors are currently responsible for almost two-third of the current elevated level of CPI inflation. This in part reflects supply constraints from continued global supply disruptions related to the pandemic and the war in Ukraine. Demand factors contribute only one-third to CPI inflation," it added.

"The fear arises that spiralling inflation and an aggressive monetary policy tightening cycle may lead to the recession, particularly in the US economy. However, the fear is unfounded," it said.

In India, the CPI inflation has been over the Reserve Bank of India's upper tolerance limit of 6 per cent for the sixth consecutive month in a row in June, reports ANI.

Retail inflation came in at 7.01 per cent in June.

"CPI inflation moderated slightly to 7.01 per cent in June 2022 as com- pared to 7.04 per cent in May 2022 due to moderation in food inflation. The June data now confirms the fact that peak had passed," the report said.

"The moderation in inflation in the last two months has been possible because of the various steps taken by the Government, including cut in taxes on petrol/ diesel , restrictions imposed on food exports, a cut in cement prices and a global meltdown in commodity prices," it added.

With several goods and services costing more from July 18 as the Goods and Services Tax (GST) Council approved an increase in rates and withdrawing tax exemptions on some, the report projects that the additional impact of GST rates increase on CPI inflation will be in the range of 15-20 bps only.

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