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If demand has been hit, as MPC says, how can companies pass on higher costs?

The MPC says that demand has been affected by the second wave while supply has proved resilient. But shouldn’t that lead to lower prices? 

June 21, 2021 / 08:29 AM IST
If demand has been hit, as MPC says, how can companies pass on higher costs?

The Reserve Bank of India’s Monetary Policy Committee believes that the second wave of COVID-19 has hit demand more than supply. Ashima Goyal, for example, said "the fall in demand far exceeds that in supply because of the decentralized structure of lockdowns that largely maintained inter-state goods movement and make possible calibrated, differentiated re-opening". Michael Patra too said, "Unlike in the first wave, supply conditions have remained relatively resilient in the second wave, but aggregate demand barring net exports...

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