Policy must remain agile amid headwinds: Finance ministry

NEW DELHI: The finance ministry on Saturday said the policy for monetary, fiscal and structural issues needs to remain agile amid a challenging global environment and forecasts of weak monsoon, which may moderate economic activity and affect consumption demand.

"The inflation outlook warrants vigilance. The current divergence between retail inflation and wholesale prices signals that upstream cost pressures are building and the pass-through to consumers, while limited so far, may not be far behind. The recent hike in petrol and diesel prices may activate both direct and indirect transmission channels and any further escalation in energy prices could narrow the existing cushion more quickly than anticipated. A deficient monsoon could add food price pressures on top of energy-driven ones," the ministry said in its monthly economic report. It said that the overall macroeconomic position in May was of "cautious resilience" with strong services exports, adequate foreign exchange reserves and a stable labour market.

"However, the confluence of elevated global energy prices, a depreciating rupee, rising upstream cost pressures and the prospect of a below-normal monsoon calls for sustained policy vigilance. Navigating FY27 will require agility across monetary, fiscal and structural dimensions to safeguard growth momentum..." it said.
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