Impact of US inflation on India’s inflation – UPSC Prelims

  • Inflation in USA increases inflationary pressure on Indian Economy.
  • Imported inflation: When prices increase globally, everything that is imported will become costlier too.
  • Indian firms trying to raise money outside India will find it costlier: Because to control inflation, the central banks of advanced economies will resort to a tight monetary policy, i.e. credit will become costlier due to higher interest rates.
  • A further increase in inflation in India: RBI will also have to align its monetary policy at home by raising interest rates domestically. That, in turn, may further raise inflation because the production costs would go up.

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