A Reserve Bank of India (RBI) paper on Tuesday said that while the initial inflationary pressure was due to successive supply shocks, a“revenge rebound” in spending is now generalising price pressures and making them persistent.

The paper, which analysed the inflation trajectory in the country after February, said that supply-side shocks resulting from the Russia-Ukrainewar pushed retail inflation beyond the RBI’s upper tolerance level of 6 per cent.

While headline CPI inflation, which remained above 6per cent since January, moderated by 90 basis points to 5.9per cent in November, driven by a fall in vegetable prices, core inflation remained sticky at 6 per cent.

“The initial inflationary pressure was delivered by successive supply shocks but as their impact waned, a revenge rebound in spending and especially a swing from goods to contact-intensive services is generalising price pressures and making them persistent,” the paper titled ‘Anatomy of inflation’s Ascent in India’said. The paper was part of RBI’s December Bulletin.

Authored by a team led byRBI deputy-governor MichaelDebabrata Patra, the paper attempts to provide a detailed analysis of the inflation trajectory in India post-February 2022. Speaking to the press at the post-monetary policy press conference, both governor Shaktikanta Das and Patra referred to the steady core inflation.

However, the central bank noted that the long-missing apex cycle is now picking up. In its state of the economy article, the central bank said that waning input cost pressures, still buoyant corporate sales and a turn-up in investments in fixed assets are heralding the beginning of an upturn in the capex cycle in India which will contribute to a speeding up of growth momentum in the Indian economy.