India Isn’t Immune to the Stagflation That Felled Its Neighbors
The country has done a better job of withstanding the pressure from more expensive commodities and a stronger dollar. But now it’s slowing down.
Can India avoid a slowdown?
Photographer: Anindito Mukherjee/BloombergLike all emerging markets that rely upon the rest of the world for commodities and capital, India has spent the last two years battling the twin challenges posed by more expensive raw materials and a stronger dollar.
In the past, trouble would come individually — not as a pair. When food, fuel and fertilizer skyrocketed between 2002 and 2008, the US currency was cheap and abundant. When the greenback surged between 2011 and 2020, basic ingredients became less costly. Their movement in the opposite direction tended to offset the overall negative impact on output and prices. But when the two soared in tandem in 2021 and 2022, stagflation risks increased in commodity-importing developing economies, new research by the Bank for International Settlements has shown.