Page 47 - Tehelka Issue 15 August 2018

banking

photo: tehelka archives
inflationary impact. • Price woes Quintals of onion andwheat
As general election 2019 is less Monetary policy are being destroyed in government godowns
than a year from hence, it is expected formulation not amid rising inflation
that the government will announce
several popular schemes ahead of it only depends on ages of working capital related to a
to woo voters. This is sure to further Consumer Price new goods and services tax.
increase the fiscal deficit and eventu- Private consumption is expected
ally affect economic growth and lead Index but equally to grow at a healthy rate as disruption
to further inflation. The monsoon is on wholesale caused by demonetisation in 2016
already deficient and it could add to fades. Capacity utilisation rates are at
the miseries of the economy. price index. Thus, its highest in four years and should
The Asian Development Bank significance provide incentives to firms to invest.”
(ADB) has also raised its inflation the However, many analysts do not
projection for India to 5 per cent from of WPI cannot rule out the RBI going for another
4.6 per cent for 2018-19. round of rate hike in near future. The
Again the reasons are higher be diminished RBI had on June 6, 2018, raised the
crude oil prices, depreciation of the repo rate by 25 basis points to 6.25 per
rupee and increase in minimum cent. It was the first rate hike in more
support prices. The Asian Develop- expected inflation. than four years due to higher risks
ment Outlook (ADO) released in April from rising inflation.
observed that the upward revision Hope still thrives The Economic Survey 2017-18
“responds to higher oil prices, signifi- However, ADB said India is expected presented on January 29, 2018 had
cant depreciation of the Indian rupee to achieve its earlier growth forecasts estimated that every $10 per barrel
in the past few months, and generous of 7.3 per cent in 2018-19 and 7.6 per increase in the price of oil reduces
increases announced on July 4 in cent in 2019-20 in view of higher economic growth by 0.2-0.3 percent-
minimum support prices for summer recovery from the goods and ser- age points and increases wholesale
crops, by which the government vices tax (GST). In 2017-18, the Indian inflation by about 1.7 percentage
intervenes in markets to protect ag- economy grew at 6.7 per cent. ADB points and widens the current ac-
ricultural producers from any sharp said growth gained momentum in Q4 count deficit by about $9-10 billion.
fall in farm prices.” The International of 2017-18 as GDP expansion reached This is what is actually happen-
Monetary Fund had also lowered 7.7 per cent. ing and it confirms the theory that
its growth projection for India by 10 The ADB report said that the Wholesale Price Index rise would
basis points to 7.3 per cent because “Other key drivers of growth include mean wholesale worries for the
of higher oil prices and speedier an uptick in public consumption, economy.
interest rate increases by the Reserve which is typical before elections, and
Bank of India (RBI) due to higher than a recovery in exports following short- letters@tehelka.com

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