The Reserve Bank of India (RBI) warned on Friday that there is a risk of high wholesale price inflation (WPI) exerting downward pressure on retail inflation, albeit with a lag.
The RBI said in its annual report that cost-push pressures from high industrial raw material prices, transportation costs and global logistics, and supply chain bottlenecks continue to have an impact on core inflation. "A considerable wedge between wholesale and retail price inflation despite a sharp rise in manufactured product inflation poses the possibility of a lag in the pass-through of input cost pressures to retail inflation," the central bank said, "although slack in the economy is muting the pass-through."
The situation in Ukraine, as well as the resulting surge in commodity prices, has clouded the prognosis for inflation in India and the rest of the world, according to the report. To keep costs from spiralling out of control, the government recently reduced excise duties on gasoline and diesel, as well as waiving import duties on several raw materials used in the steel and plastic industries. Furthermore, export duties on iron ore and iron pellets have been increased.
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