India must prepare itself to handle the inevitable inflation triggered by the crisis in Ukraine. Explain (200 Words)
Refer - Business Line
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IAS Parliament 3 years
KEY POINTS
· As the conflict between Russia and Ukraine escalates, prices in the economy are beginning to surge, creating several challenges for policy makers.
· With Russia being the world’s largest exporter of gas and the second largest crude oil exporter, markets have a reason to be worried, though sanctions have not been imposed on fuel purchases from Russia.
· India’s problems are compounded by rupee depreciation, increasing the cost of imported crude oil.
· Ukraine and Russia account for almost 90 per cent of India’s imports of sunflower oil. The use of palm oil and canola as biodiesel has also made prices surge as search for crude oil alternatives grows.
· The price increase will impact consumption and investment, if it is prolonged. But the immediate concern of the RBI and the Centre is the widening current account deficit as the value of imported goods, especially oil surges.
· Rising prices can have a serious impact on growth and the RBI will need to take corrective action. Even as the spike in inflation is driven by supply-side factors, a rate hike can buttress the rupee and help stem foreign portfolio outflows.
chetan taneja 3 years
hi
IAS Parliament 3 years
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