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184 Economic Survey 2021-22

Box 4: Global commodity prices and domestic inflation

International commodity prices rose sharply during the second half of 2020 and 2021. Fluctuations
have been more in energy prices. After registering negative growth during the COVID-19 period, the
energy index has recorded triple digit growth in 5 out of 12 months since January 2021 (Figure 4A).
Food and metals and mineral prices have shown double digit growth during the current year.

Figure 4A: Year on year growth in international commodity price indices

168 Energy
142 Food
116 Metals & Minerals
90
(yoy) (per cent) 64

38

12
-14
-40
-66
Feb-19 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 Apr-21 Jun-21 Aug-21 Oct-21 Dec-21

Source: World Bank commodity price indices

While inflation in food items in India remained under control because of supply-side management,
high global prices of manufacturing items have had an impact on the domestic prices, especially basic
metals. The rise in demand for vehicles, manufactured goods, and pickup in construction activities
have led to the rise of global aluminium prices. Due to environmental concerns, China, a major
exporter of aluminium, has curtailed its production.

Copper prices have increased through the initial months of 2021. The increase in prices is also because
of extraordinary global uptake in consumer goods and demand from China due to its enhanced
investment in infrastructure and construction. Falling inventories and threats of strikes in Chile and
Peru has elevated production risks and created pressure on copper prices (World Bank, 2021).

The initial surge of iron ore prices largely reflected the robust demand for steel production in China,
leading to higher iron ore imports. However, recently decline in prices has been observed. Iron ore
supplies have improved in recent months after the earlier weather disruptions in top exporter Australia
and coronavirus outbreaks in number two shipper Brazil.
3

3 https://www.reuters.com/world/americas/iron-ore-makes-unruly-retreat-more-normal-price-levels-
russell-2021-09-20/