India may gain from advanced economies' recession in terms of decline in commodity prices

28 Jun 2022 , 12:33 PM

All markets are experiencing global recession fears, but many believe that recessions in industrialized nations might be good for the Indian economy.

Samiran Chakraborty, managing director and top economist for India at Citigroup, stated in an interview with Bloomberg Television on Monday that “India being a net importer of commodities should gain on the inflation front.” A global downturn, he continued, would nonetheless put pressure on India since it would restrict exports and economic expansion.

It looks that in a twisted manner since policymaking at the present is only focused on controlling inflation, this may be advantageous for India to some extent, Chakraborty said.

As important central banks around the world, including the US Federal Reserve and the ECB, aggressively raise interest rates to combat the escalating inflationary pressures brought on by the ongoing conflict in Russia-Ukraine and the rollback of pandemic-era measures, concerns about a recession have emerged.

The Reserve Bank of India has increased its benchmark lending rate by 90 basis points since May as a result of inflationary pressures. Analysts believe that more rises might be announced as long as headline inflation continues to be over the central bank’s Monetary Policy Committee (MPC) level and is anticipated to do so for the foreseeable future.

Michael Patra, the deputy governor in charge of monetary policy, recently predicted that for the ensuing three quarters, consumer price index-based inflation will remain over the RBI’s target range of 2 percent to 6 percent.

The RBI will be required to send a letter to the federal government explaining why it missed the target and outlining corrective steps if inflation is not kept within the statutory range for three consecutive quarters.

According to Patra, there are signs that inflation is peaking as the effects of monetary policy are felt throughout the economy. The CPI is predicted to fall below 6 percent in the fourth quarter of 2023 and soften to 4 percent in two years.