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Inflation has risen across the board largely driven by global factors, in proportions not witnessed in the decades before. These have an even more conspicuous impact on net commodity importing countries like India, said RBI Governor Shaktikanta Das, speaking at the inaugural Kautilya Conclave, recently.

While globalization of trade and capital flows had, over the years, facilitated increased productivity and lowered cost of tradeable goods and services, these benefits have come with certain risks and challenges. No country has been immune to the shocks to food, energy and commodity prices that have affected inflation globally, pointing to a clear sign of transmission of global shocks to generalized and synchronized inflation across the world.

While 2021 saw 77 percent of countries reporting accelerated inflation rates, the recent events, including the war in Europe, which came post the debilitating effect of lockdowns due to Covid-19, has further heightened the situation. These figures are expected to grow further to 90 percent in 2022, as per the International Monetary Fund’s (IMF) latest projections. Further, two-thirds of economies are witnessing inflation rates of over 7 percent, as compared to an average inflation target of 2 percent for advanced economies and 3.4 percent for emerging market economies.

According to Governor Das, price stability is key to maintaining macroeconomic and financial stability. “The RBI will continue to calibrate policies with the overarching goal of preserving and fostering macroeconomic stability. In this endeavor, RBI will remain flexible in its approach while being cogent and transparent in our communication,” he said.