Question 1 · 10 marks · 188 words written
Opening · a definition
Imported inflation refers to import of costly goods from outside leading to increased inflation in the country.
Body · points
Factors influencing it →
Price of goods in international markets e.g. High crude prices due to high demand.
Currency exchange rates as high exchange rates leads to costly imports.
Geopolitical conflicts e.g. Iran-Israel tensions increasing price of oil & other resources.
Dependence on imports for crucial goods e.g. India depends on imports for 85% of crude oil and 65% of natural gas needs.
Safety and security of trade routes (eg) Houthi conflict and recent blockade of Suez Canal.
Availability of alternatives (eg) Russian crude helped India to save $8 billion due to cheap oil.
Measures to mitigate the impact →
Diversification of supply chains (eg) oil from Russia, USA, West Asia.
Self Reliance through Atmanirbhar Bharat and de-risking by supply chain Resilience initiative.
Manage currency by "Managed Float" or "Dirty Float" of RBI.
Secure shipping lines & trade routes (eg) Operation Sankalp of Navy.
Close · a framework
Inflation shall be kept under control range decided by Monetary policy framework agreement for growth & development.