The Finance Ministry, in its monthly economic review released on Wednesday, stated that the ongoing West Asia conflict and a weak monsoon season present downside risks to India's economic growth. These factors could exert pressure on inflation, as well as on fiscal and external deficits.
Policy Safeguards and Domestic Buffers
The review noted that while the government seeks to sustain economic growth, policy measures are expected to safeguard medium-term fiscal and external stability. It emphasized that India's domestic demand, policy buffers, resilient financial system, and sustained public investment provide some insulation against these shocks.
Risks from Prolonged Uncertainty
However, the ministry raised a critical question: whether these buffers would prove adequate in the event of prolonged uncertainty regarding energy and fertiliser supplies. The West Asia conflict is described as a significant supply shock, with rising risks to inflation, trade, and financial flows.
Passing on Costs Inevitable
The report also observed that some countries have begun to allow higher costs to be passed on to consumers and industry. It added that while some nations have yet to do so, such adjustments are inevitable.
