The Brent crude price, which forms the bulk of the Indian crude oil basket, has hovered at $105-106 per barrel since April 1, after having risen above $135 in the first/second week of March from around $95 just before the crisis, it said. The report said that in future, elevated prices of energy & other commodities and supply side disruptions due to the Russia-Ukraine conflict pose a challenge to the growth trajectory. They also pose upside risks to inflation. The magnitude of the impact would depend on the persistence of high prices.
“Nevertheless, domestic economic momentum witnessed in government capital expenditure, rise in GST collections and import of capital goods offer comfort that the impact on the Indian economy may turn out to be tolerable. Be that as it may, India’s economy, having swiftly recovered in 2021-22 after the pandemic induced contraction, may prove resilient owing to the government’s thrust on capital expenditu- re and improved corporate sector’s financial health,” according to the finance ministry’s monthly economic report for March.
The report said that geopolitical conflicts and their consequent impact on food, fertiliser and crude oil prices cast a cloud on the growth outlook globally. “India may feel its impact although the magnitude will, of course, depend on how long the dislocations in energy and food markets persist in the financial year and how resilient In- dia’s economy is to mitigate the impact. Transient shocks may not have a big effect on real growth and inflation,” according to the report.
It said that international fertiliser prices have stabilised albeit at a higher than the pre-conflict level and global dynamics may eventually lower their level. “For the present though, the economy is benefiting from continued growth momentum in the agriculture sector with the first advance estimates of production of horticulture crops for 2021-22 indicating an increase in area sown for both fruits and vegetables over 2020-21,” according to the report.
It said that offsetting these potential headwinds, GatiShakti and productionlinked incentive schemes will drive investment, which will combine with supply chains strengthened by structural reforms taken in the past few years to deliver high post-recovery growth for the Indian economy.