The Department of Economic Affairs (DEA), a division of the Indian Finance Ministry, reported that the Chinese economy is in trouble and that the country's central bank has suddenly decreased its policy rate, signalling grave concerns about growth.
According to the DEA's Monthly Economic Review, financial markets throughout the world have started to celebrate the near-term easing of inflation pressures in developed countries prematurely and may now become risk averse as a result of China's policy rate reduction.
The DEA said in its latest economic evaluation that the geopolitical climate continues to be difficult and unstable. It warned that "this could lead to new supply difficulties in the winter for crucial commodities like crude oil and natural gas."
The review said that inflation rates are high and that, absent more significant policy tightening, it would be unlikely to see the advanced world's inflation rate fall to between two and three percent.
"A recession would almost certainly result from such tightening in terms of business earnings and economic growth. Thus, a wake-up call from rich country stock markets might send growth chills over the entire world "the evaluation concludes.
India currently appears to be in a stronger position than it did two months ago on the growth-inflation-external balance triangle for 2022–23 as a result of the government's and the central bank's quick response in terms of economic policy, the DEA said.
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