12-Sep-2024, 02:43 PM
According to a recent report by the State Bank of India (SBI) Research, India has managed its inflation trajectory far better compared to major economies like the United States, Germany, and France in the past year.
Inflation Trends in India
The report highlights that India’s retail inflation, measured by the Consumer Price Index (CPI), is expected to remain below or close to 5% for most of the 2024-25 fiscal year, except for September and October. This is a significant achievement considering the global inflationary pressures faced by many countries. The SBI Research report notes that India’s inflation has been largely within the Reserve Bank of India’s (RBI) comfort zone of 2-6%, although it remains above the ideal 4% target. The report attributes this effective management of inflation to the RBI’s proactive monetary policy measures, including a cumulative 250 basis point hike in the repo rate since May 2022.
Comparison with Global Peers
In contrast, the US, Germany, and France have faced much higher inflation rates in recent months. The US inflation rate, which peaked at over 9% in 2022, has since moderated but remains elevated at around 5%. Similarly, Germany and France have grappled with double-digit inflation rates, with Germany’s inflation reaching 11.1% in November 2022 and France’s hitting 7.1% in December 2022.The SBI report suggests that India’s ability to manage inflation expectations has been crucial in navigating the challenging economic landscape. The RBI’s policy decisions have aimed to strike a balance between supporting economic growth and maintaining price stability.
Factors Contributing to India’s Success
Several factors have contributed to India’s relatively better performance in managing inflation compared to its global peers:
- Effective monetary policy: The RBI’s timely and decisive actions in raising interest rates have helped curb inflationary pressures.
- Favorable monsoon: The satisfactory progress of the monsoon season in 2024 has helped maintain food prices and offset the impact of global supply chain disruptions.
- Targeted government interventions: The Indian government’s measures to address supply-side bottlenecks and provide relief to consumers have complemented the RBI’s efforts.
Conclusion
While India’s inflation remains a concern, the SBI report highlights the country’s resilience in managing price pressures better than major economies like the US, Germany, and France. This achievement underscores the effectiveness of India’s policy framework and the commitment of its institutions to maintaining price stability and supporting economic growth.
