Ukrainian Crisis Hits India's Economy as RBI Projects Lower Growth and Higher Inflation

© AFP 2023 / PUNIT PARANJPEIndian people speak on their mobiles outside the Reserve Bank of India (RBI) headquarters in Mumbai. (File)
Indian people speak on their mobiles outside the Reserve Bank of India (RBI) headquarters in Mumbai. (File) - Sputnik International, 1920, 08.04.2022
The Ukrainian crisis has started to make a dent in developing economies like India, which are still reeling from the COVID-19 pandemic. The rise in crude oil prices and disruption in the supply chain will likely delay the economic recovery further.
The Reserve Bank of India (RBI) — the country's central bank -- revised the growth forecast and inflation outlook for the $3 trillion economy in the first monetary policy announcement of the current financial year on Friday.
Inflation for the fiscal year 2022-2023 is now projected at 5.7%, up from the 4.5% forecast in the February meeting.

"Sharp pump prices may push inflation; edible oil prices will remain at an elevated level in the near future," Das said.

The governor said that the rise in crude oil prices due to the Russia-Ukraine situation poses "the biggest risk to India's economic prospects".
Brent crude prices crossed $130 per barrel on 8 March and have hovered in the $100-120 range since mid-March.
Forecasts anticipate a crude oil price of $100 per barrel this year, representing $25 jump over earlier estimates.
If the inflation outlook is raised, the RBI slashed the economy's growth forecast to 7.2%, down from February's projection of 7.8%.
The Indian economy had witnessed an 8.9% growth rate in 2021-22 (ending March 2022), above its pre-pandemic (2019-20) level by just 1.8%.
Nevertheless, the governor said that the RBI is not hostage to any rule book, and no option is off the table when the need of the hour is to safeguard the economy.
"The sky today may be overcast with clouds, but we will use all our energy and resources to let the sunlight illuminate India's future," Das said.
In the sequence of priorities, RBI now puts inflation before growth. "The time is appropriate to prioritise inflation ahead of growth," Shaktikanta Das said.
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