During the Monetary Policy Committee (MPC) meeting on Wednesday, Reserve Bank of India (RBI) Governor Shaktikanta Das announced a projection of retail inflation at 4.5% for the current fiscal year (FY25).
Analysts attribute this optimistic outlook to a robust monsoon season and stable supply conditions in the market.
Das highlighted that food inflation is likely to decline later in the year, bolstered by a strong inventory of essential commodities.
The MPC estimates Consumer Price Index (CPI) inflation for FY25 to remain at 4.5%, with quarterly projections of 4.1% for the second quarter, 4.8% for the third, and 4.2% for the fourth quarter.
“Food inflation could see some easing later in this fiscal on the back of strong kharif sowing, adequate buffers and good soil conditions,” Das stated, noting that these factors are likely to stabilize food prices and alleviate inflationary pressures on the economy.
However, the RBI Governor cautioned that retail inflation in September could rise due to an unfavorable base and increased food price momentum.
“While we have managed to keep inflation within the tolerance band, we must remain vigilant,” he said, emphasizing the need for careful monitoring.
Das also remarked that macroeconomic indicators for inflation and growth appear well-balanced, although the decline in headline inflation has been gradual and uneven.
The RBI’s mandate is to maintain CPI-based retail inflation at 4%, and recent data shows that inflation remained below this target for the second consecutive month in August, registering a year-on-year rate of 3.65%. This figure marks the second-lowest inflation rate in five years.
Despite this positive news, Das warned that volatility in food prices continues to pose a potential risk.
He pointed out that household consumption is expected to accelerate in the second quarter of FY25, supported by a decrease in headline inflation and a revival in rural demand.
As the RBI navigates these economic conditions, the focus remains on sustaining growth while managing inflation effectively in the coming months.
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