Besides slowing global demand, excessive volatility in the exchange rate along with uni-directional movement bias witnessed during the last one year, persistence of high inflation accompanied by wage pressure which erodes export competitiveness, and infrastructural bottlenecks have emerged as major challenges for Indian exporters. Commodity price channel Commodity price channel also serve as a major transmission mechanism of global developments to the domestic economy.
India is highly reliant on imports, particularly oil imports. About 70 per cent of demand for oil is met by imports and almost 100 per cent for the demand of gold is met via imports. Therefore, any change in price of these commodities has implications for price of these goods in the Indian markets. Inherently, the demand for these goods is relatively price inelastic.