Rising commodity prices pose macro risks to India: Morgan Stanley
Analysts at Morgan Stanley believe that rising international oil and coal prices pose macro risks for the Indian economy. There are upside risks to inflation and growth. According to analysts, growth will only improve from a two-year compounded annual growth rate, which will lead to normalisation of the policy. The Reserve Bank of India (RBI) may start the process of policy normalisation with a 0.15-0.20 per cent hike in the reverse repo rate in December 2021 and February 2022. If growth improves further, the central bank may also hike repo rate in February. Inflation will move back toward 5.5 per cent by end of March 2022. Morgan Stanley further stated that a 10 per cent rise in oil prices can increase CPI inflation by 0.40 per cent and widen the country’s current account deficit (CAD) by 0.3 per cent of GDP.