Rising Inflation across the Globe

Tomorrow on 8th of June 2022 the MPC of RBI would announce the monetary policy for India and it is expected that the interest rates would be increased by around 50 basis points in response to the rising inflation. It should be noted that inflation in the Indian economy has been rising for many months and there is no indication of it falling in the next few months. These realities have forced RBI to reconsider its accommodative monetary policy which was aimed at supporting growth in the economy which has been hit hard by the Coronavirus pandemic.

It must be noted that today inflation is not a local issue altogether. Rather if it said that no economic activity across the globe remains a local activity but a global activity in the globalized markets and financial integration. Today the whole world is under tremendous pressure of rising inflation. This has been caused by many factors. Some factors are global in nature and some are local. However it must be noted that rising food inflation has been the largest contributor in overall inflation across the globe.

The local factors like unexpected variation in food production in different countries which is having spillover impact on the whole world turning into a global food crisis which looms larger. The problem relating to food inflation has been even reinforced by the Russia-Ukraine conflict which has disrupted the food supply chain.

Apart from the food inflation, due to the Coronavirus pandemic, the global supply as well as the value chain has been disrupted and has realigned to adjust with the new global realities which are causing shortage of supply in many sectors. It must be noted that demand and supply dynamics in many sectors have completely changed in post pandemic times.

Apart from these factors, the report of the resurgence of coronavirus in many countries is also affecting the businesses. Many businesses are either waiting to resume the full production capacities as well as new investments. These are resulting in deteriorating business sentiments across the globe.

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