Days before the Reserve Bank of India's monetary policy announcement, the finance ministry warned that rising fuel costs, a declining rupee, and the possibility of a below-normal monsoon could revive pricing pressures.
The Department of Economic Affairs stated in its May monthly economic review that despite rising internal and international uncertainty, the economy is still "cautiously resilient" and that domestic fundamentals are generally holding up.The ministry stated that continued policy vigilance is necessary due to the combination of high global energy costs, a declining rupee, growing upstream cost pressures, and the possibility of a below-normal monsoon.

The evaluation is conducted before to the RBI's Monetary Policy Committee meeting, which is scheduled for next week. The policy decision is due on June 5. Concerns about inflationary pressures and attempts to strengthen the rupee, which earlier this month hit a record low of about 97 against the US dollar, have raised expectations of a tighter policy approach.
The ministry warned that wholesale pricing pressures have dramatically increased, increasing the possibility that higher input costs could eventually filter into consumer prices, even though retail inflation in April remained below the RBI's 4% objective.
In April, rising energy prices drove up manufacturing expenses, causing producer inflation to reach a three-and-a-half-year high.The government also cautioned that India's inflation and outlook for the external sector are seriously threatened by the consequences from the crisis in West Asia, especially if energy supplies are disrupted.It stated that the "single most consequential variable for India's external and price outlook" is still how long the Strait of Hormuz disruption lasts.
The assessment claims that the Indian economy is facing challenges that cannot be completely shielded from outside shocks due to rising crude oil prices, tighter global financial conditions, and slower global growth.

The government also cautioned that India's inflation and outlook for the external sector are seriously threatened by the consequences from the crisis in West Asia, especially if energy supplies are disrupted.It stated that the "single most consequential variable for India's external and price outlook" is still how long the Strait of Hormuz disruption lasts.
The assessment claims that the Indian economy is facing challenges that cannot be completely shielded from outside shocks due to rising crude oil prices, tighter global financial conditions, and slower global growth.