NEW DELHI: Higher oil prices, slowing global demand for India’s exports, and inflation are acting as the biggest drag factors for not only India’s equity markets but also the country’s growth prospects.
Higher inflation reduces purchasing power and impacts revival of consumption- which is the largest component of India’s gross domestic product. “We foresee the consumer price index (CPI)-based, or retail inflation rising to 6.8% on average this fiscal, compared with 5.5% last year. The impact of this year’s heatwave on domestic food production, coupled with persisting high international commodity prices and input costs, will cause a broad- based rise,” said Crisil rating in a report.
Add to that elevated commodity prices due to the ongoing Russian-Ukraine war.
The seemingly unending Russia-Ukraine war has wreaked havoc in commodity markets. While freight costs have moderated, they are still elevated when compared with the beginning of this year (pre-war). “This seems to suggest that a continuing war will prevent any meaningful correction.
