The Indian finance ministry has identified potential inflation risks, citing recent fuel price increases, global energy price fluctuations, rupee depreciation, and the possibility of a below-average monsoon.
Retail inflation rose to 3.48% in April, remaining within the Reserve Bank of India's target range, while wholesale prices surged to 8.3%.
The ministry warned that the recent fuel price hikes may lead to increased costs for transport, energy, and food, potentially affecting retail inflation in the coming months.
Despite a resilient macroeconomic position, the ministry emphasized the need for sustained policy vigilance due to elevated global energy prices, a depreciating rupee, and rising upstream cost pressures.
The report expressed confidence in the economy's underlying strength, citing stable manufacturing and services activity, a stable labor market, and adequate foreign exchange reserves.
However, it cautioned that any significant rainfall deficit, coupled with current geopolitical conditions, could lead to food inflation and weaken rural demand.
