finagarut22 finagarut22

суббота, 25 февраля 2023
11:22 India economic resilience test
India's economic resilience test  
 
 
Friday February 24  will be the year of the Russian invasion of neighboring Ukraine. The previous months  were characterized by a steady increase in tension. The invasion drove up the prices of fuel, fertilizers, grain and other essential commodities, of which Russia and Ukraine were the main suppliers. This, in turn, caused  imports to soar in countries like India that depended on  foreign fuels to boost their economies. As a result, inflation has risen 
times, often at unprecedented levels in recent years.
 
Since the end of last year, the prices for fuel  and  other goods, which had risen sharply after the war, have fallen. However, the effects of the crisis on the Indian economy are far from over. For example, the consumer price index rose at its fastest pace in three months (6.5% yoy) in January, shattering initial hopes that falling global fuel prices would lead to a fall supported by domestic inflation. This in turn will affect how the Reserve  Bank of India (RBI) decides on the future path of  rate hikes in 
 
The Russo-Ukrainian war was a major test of the resilience of the Indian economy, both short- and long-term, in the face of what economists call external "shocks". How was it? 
 
Changing  Trade Patterns 

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This implies that Russia will be more eager than ever to sell its crude elsewhere, and its share of Indian crude supplies could increase even further. Indeed, while the effective price at which India imports crude still closely tracks the international price (Chart 2), in January, when Russian crude imports of India soared to their highest level ever, the Indian price of crude decoupled from the global price to a sharp extent. If this trend continues, the changing pattern of India’s fuel imports could well have a far bigger impact on the overall domestic inflation rate (and the trade deficit) in the longer term than most other direct attempts to tinker with either of these two indicators.

The Inflationary Aftermath

If Russia does become the mainstay of India’s fuel imports, with resulting moderating effects on the pace of inflation, it could have far-reaching effects on the economy, though the jury is still very much out on this. Upticks in fuel prices have always had a highly predictable effect on the Indian economy—on both growth and inflation.
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