RBI Warns Resurgence of Covid-19 in India Could Lead to Further Inflation: Report

The Reserve Bank of India expressed worry about the second wave of Covid-19 in India disrupting supply chains and leading to further inflation.

According to a report by Bloomberg, inflation came in at 5.5 per cent in March, higher than 5 per cent in February owing to a sharp rise in food and fuel inflation. As part of its inflation-targeting mechanism, the government has retained RBI’s flexible inflation target in the 2-6 per cent band for the five years through 31 March 2026.

Last week, Fitch Ratings said the resurgence of Covid-19 infections may delay India’s economic recovery, but won’t derail it, as it kept the sovereign rating unchanged at ‘BBB-‘ with a negative outlook. It projected a 12.8 per cent recovery in GDP in the fiscal year ending March 2022 (FY22), moderating to 5.8 per cent in FY23, from an estimated contraction of 7.5 per cent in 2020-21.

Fitch had in June last year revised outlook for India to ‘negative’ from ‘stable’ on grounds that the coronavirus pandemic had significantly weakened the country’s growth outlook and exposed the challenges associated with a high public debt burden. India enjoyed ‘BBB-‘ rating since the upgrade in August 2006, but the outlook has oscillated between stable and negative.

Vital medical supplies began to reach India on Tuesday as hospitals starved of life-saving oxygen and beds turned away coronavirus patients, and a surge in infections pushed the death toll close to 200,000.

A shipment from Britain, including 100 ventilators and 95 oxygen concentrators, arrived in the capital New Delhi, though a spokesman for Prime Minister Boris Johnson said Britain had no surplus Covid-19 vaccine doses to spare.

France is sending eight large oxygen-generating plants this week while Ireland, Germany and Australia are dispatching oxygen concentrators and ventilators, an Indian foreign ministry official said, underlining the crucial need for oxygen.

U.S. President Joe Biden reaffirmed U.S. commitment to helping India, saying he was expecting to send vaccines there while senior officials from his administration warned that the country was still at the “front end” of the crisis.

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