Higher crude and commodity prices downside risks to Indian economy: EY

Indian economy appears to be quite robust and resilient despite global challenges, says EY, adding that the downside risks to the economy emanate from higher global crude and commodity prices.

“With inflation...both CPI and WPI...trending downwards, the Indian economy appears to be quite robust and resilient in spite of continuing global challenges,” EY says in the monthly economy watch for May.

“Some downside risks to the Indian economy could come from higher global crude and commodity prices. Average global crude price increased to a six-month high of $88/barrel in April 2024 from $83.5/barrel in March 2024 owing to heightened geopolitical tensions, signs of firmer industrial demand, and tight supplies including due to the extension of OPEC+ production cuts announced in March 2024,” says D K Srivastava, chief policy advisor, EY India in the report.  

It says retail inflation in the current quarter could be marginally lower than RBI’s projection. “The CPI inflation at 4.8% in April 2024 continues its downward trend since January 2024. It is the second successive month when inflation is below 5%. Although food inflation is marginally higher at 8.7%, the downward pressure emanates from petroleum related commodity groups namely, fuel and light and transport and communication services. Core inflation has also trended downwards at 3.2%, which is the lowest in the 2012 base CPI series. If this trend continues, CPI inflation in 1Q of FY25 may turn out to be marginally lower than RBI’s projection of 4.9%,” Srivastava said in the Economy Watch.

“WPI inflation at 1.3% in April 2024 crossed the level of 1% after 12 months. It continued to contract for seven successive months from April to October 2023. It remained below 1% during November 2023 to March 2024,” he observes.