Increasing commodity prices are affecting the Indian economy

Continued rising commodity prices will have a major impact on the Indian economy which is still struggling to emerge from the impact of Covid-19, says the Ind-Ra rating agency.

According to Ind-Ra, high inflation that is not commensurate with the corresponding increase in wage growth will have a negative impact on demand for consumption and stimulate investment in the economy.

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“On the other hand, India’s bill to import oil, coal and fossil fuels was $ 129.86 billion, $ 22.45 billion and $ 13.14 billion respectively.”

According to the agency, faster demand than expected, promotional measures announced by the US, Covid-19 vaccine rollout and higher interest rates exacerbate inflation.

Among the major non-energy groups, agricultural commodities increased by 16 percent, fertilizer by 30.2 percent and metals and minerals by 25.1 percent.

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At the further divided level, the prices of copper, aluminum, tin, nickel and zinc increased by 26.3 percent, 19.2 percent, 46.6 percent, 25.1 percent, and 12.4 percent respectively.

This phenomenon occurs as a “long-term, high-trend trend in a wide range of fundamental values, driven by structural change in demand”.

The last major cycle began in the early 2000’s and lasted until the 2008 global financial crisis.

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