The Reserve Bank of India (RBI) on Friday forecast consumer price index (CPI) inflation or consumer inflation at 5.7 percent in 2021-22, forecast it to be at 5.9 percent in the second quarter, and 5.3 percent in the second quarter. Third quarter. quarter and 5.8 percent in the fourth quarter of 2021-2022, with risks being broadly balanced.
It projected CPI inflation for the first quarter of 2022-2023 at 5.1 percent.
However, RBI Governor Shaktikanta Das noted during his closing speech to the Monetary Policy Committee (MPC) that overall CPI inflation rose sharply to 6.3 percent in May 2021, driven by a broad rise across all major groups at unfavorable rates. supply shocks, sector-specific mismatches between supply and demand and spillovers from rising global commodity prices.
While it remained at 6.3 percent in June, Das said core inflation showed a noticeable moderation.
He predicted that inflation could remain close to the upper tolerance line until the second quarter of 2021-2022, but this pressure should ease in the third quarter of the current fiscal year, mainly due to the arrival of the kharif crop and as supply side measures.
At the same time, however, the RBI governor said he was optimistic and said a revival of the southwest monsoon and an uptick in kharif seeding, buffered by adequate food supplies, should help contain pressures on grain prices in the coming months.
He noted that high-frequency food price indicators show some moderation in the prices of edible oils and legumes in July due to supply-side interventions by the government.
Referring to the high pump prices of petrol and diesel with their second-round effects, he said that fuel prices along with logistics costs continue to negatively impact manufacturing and services cost conditions, although weak demand is dampening the pass-through to manufacturing. prices and core inflation.
“Since the start of the pandemic, the MPC has prioritized a resurgence in growth to mitigate the impact of the pandemic. The available data points to exogenous and largely temporary supply shocks driving the inflation process, confirming the MPC’s decision to look through it.
Supply-side drivers may be transient, while demand-pull pressures remain inert given the sluggish economy. A preemptive monetary policy response at this stage could negate the nascent and hesitant recovery trying to gain a foothold in extremely difficult circumstances, Das said.