Riding out the storm

External shocks and stagflation risks require optimal policy responses

Just as India was crawling its way out of the pandemic, the war, a hawkish Fed, and China shocks have reignited macro uncertainties. Combined, they risk higher inflation and slower growth in FY23, alongside more policy trade-offs.

Looming external shocks

The Russia-Ukraine war: The ongoing war has fewer direct effects on India, but more indirect ones through higher commodity prices and weaker global demand. Global supply chains have been disrupted again due to the key roles of Russia and Ukraine in the exports of food, energy, fertilisers, industrial metals, and gases. Globally, the European economies are the most exposed due to their