ISAS Insights

Most South Asian economies are now faced with exorbitant price hikes in fuel and non-fuel commodities. The current hikes have exposed the vulnerability of the low and middle income groups and the government exchequers, particularly in Sri Lanka, Bangladesh and Pakistan. The point-to-point inflation in these three countries is now double-digit. India is relatively less vulnerable to the current inflationary shock. Nevertheless, of late, the Reserve Bank of India (RBI) acknowledged that price spiral in the economy is artificially “suppressed” as higher international oil prices have not been passed on to domestic consumers. The inflation scenario in Nepal is likely to follow the price level in India, largely because the former’s domestic currency is pegged to that of the latter.