In 2020, supply-side disruptions pushed inflation beyond the RBI’s upper tolerance limit of 6 per cent. The pandemic delivered a larger shock on supply than it did on demand, through supply-chain disruptions in the case of essential goods, food, medicine and industrial goods. In turn, this aggravated cost-push inflation in the country. As the pandemic receded, the conflict in Russia-Ukraine broke out, bringing in its wake worldwide inflation, fuelled mostly by surging prices of crude oil and other commodities. Prices soared to a decadal high and ate into household budgets, in turn prodding Central Banks to
tighten monetary policy. A convalescing world economy was left to confront unprecedented rates of inflation. The spectre of stagflation loomed large on the horizon. In response, developed economies were left with no option but to raise interest rates. As the US Federal Reserve raised rates, the US dollar appreciated, making dollar-denominated fuel imports even dearer.  In advanced economies, the rate of inflation is projected by the International Monetary
Fund (IMF) to increase from 3.1 per cent in 2021 to 7.2 per cent in 2022, the highest since 1982. The Euro area saw the rate reach 10.0 per cent in September 2022 (WEO, October 2021). The US inflation reached its 40-year high at 9.1 per cent in June 2022 before moderating to 6.5 per cent in December 2022, while the UK saw an annual price rise of 9.2 per cent in December 2022. Germany witnessed inflation of 8.6 per cent in December 2022. Among emerging markets, Brazil saw a moderation in price trends, while Turkey’s inflation was above 80 per cent from August to November 2022 before declining slightly to 64.3 per cent in December 2022. The war had compounded the effects of a strong recovery in demand for goods and services after the pandemic. The inflation rate in Emerging Markets and Developing Economies (EMDEs) is anticipated to have increased from 5.9 per cent in 2021 to 9.9 per cent in 2022 (WEO, October 2022)