The Reserve Bank of India on Thursday cautioned against rising global commodity prices that can fuel inflation in emerging market economies, which are otherwise showing resilient growth.
The Central Bank also raised concerns over unemployment and slow recovery in the U.S. and financial stability in Europe.
“...international commodity prices such as oil, food, industrial inputs and metals have risen noticeably in recent weeks. Reflecting the strength of demand and higher commodity prices, inflation has started creeping up in most EMEs,” the RBI said in its second mid-quarterly monetary policy review.
It, however, added: “Major emerging market economies (EMEs) continue to experience robust growth.”
The apex bank said significant changes have taken place in the global economy, since its quarterly review at the beginning of November.
“Recent data show some signs of improvement (in the U.S.), especially in respect of real GDP and consumer confidence, even though the unemployment rate has increased. Although economic recovery has been progressing in Europe, financial stability concerns have resurfaced as the sovereign debt problem spread further,” it said.
A slow recovery and persistent unemployment had motivated the U.S. government to undergo another round of quantitative easing.
In Europe, sovereign debt crisis, result of large-scale government borrowing, has forced the Irish government to take a bailout from the European Union. Greece, Spain and Portugal are also in grip of crisis, with worries being expressed about the health of the Belgian economy as well.
The Indian government had earlier this month expressed concern over the recovery in the Euro zone and the slow recovery in U.S.
Earlier, Finance Minister Pranab Mukherjee had cautioned against any spread of crisis beyond Ireland, saying Europe accounts for 36 per cent of India’s exports.