What’s In Store For The Economy OnSecond Half?
The recent escalation of the Israel-Palestine conflict and geopolitical tensions in West Asia pose significant risks to global oil prices and supply chains, potentially impacting India's economy. The Indian economy, which saw robust growth of 7.8% in the first quarter of 2024, faces new uncertainties with rising crude oil prices and potential disruptions in food and fertilizer supplies. Although the Reserve Bank of India (RBI) anticipates a slight moderation in GDP growth to 6.5%, the conflict could exacerbate inflationary pressures and increase transportation costs. Finance Minister Nirmala Sitharaman has highlighted concerns about how these disruptions might affect inflation and supply chains. The RBI's Governor, Shaktikanta Das, has underscored the added risks from volatile markets and high U.S. bond yields, suggesting that interest rates will remain elevated. Despite domestic inflation easing to 5% in September, it remains above desired levels, and future trends indicate potential challenges for consumption and investment. The International Monetary Fund (IMF) has slightly revised India's GDP growth forecast to 6.3%, reflecting the impact of these global and domestic uncertainties. The article examines how these factors might influence India's economic trajectory and the balance of domestic and international risks.
KEYWORDS: Crude Oil, Economic Growth, Inflation, Interest Rates, Supply Chains.