Geopolitical events bring uncertainty: Finance ministry report - Times of India

Geopolitical events bring uncertainty: Finance ministry report – Times of India


NEW DELHI: Recent geopolitical developments have introduced an element of uncertainty into the economic growth and inflation outlooks in the new financial year, a finance ministry report said on Tuesday and asserted that the Union Budget with its focus on capital spending and strong economic fundamentals will provide support.
Policymakers have said Russia’s invasion of Ukraine has disrupted value chains and will hurt global and domestic recovery which was underway after the third wave of the Covid-19 pandemic. Worries over inflation and economic growth have surfaced against the backdrop of the turmoil in the global financial and commodity markets since Russia’s invasion of Ukraine. The RBI has also said that it may review the growth and inflation due to the ongoing war in Ukraine.
“However, the Budget with its capex orientation and prudent assumptions along with strong macroeconomic fundamentals will support growth and provide a floor to it amidst global political turmoil and likely higher volatility in financial markets,” according to the monthly economic report for February prepared by the economic division in the ministry. It said GDP estimate at 5.4% for the third quarter of 2021-22 is reflective of a strong growth momentum, which has been aided by rapid vaccination coverage and accommodative monetary and fiscal policy support.
The report said geopolitical tensions involving Ukraine triggered a turbulence in the global economy. Within days, international prices of crude oil and other commodities shot up, escalating the cost of India’s import basket.


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