Food price volatility poses a potential risk despite overall retail inflation remaining below the Reserve Bank of India’s (RBI) target of 4% for the second consecutive month in August, according to the latest Bulletin released by the RBI on Friday.
The September Bulletin highlighted a slowdown in global economic activity and sluggish disinflation, prompting caution among monetary policy authorities. “Consumer price index inflation came in below the Reserve Bank's target for the second consecutive month in August, although food price volatility remains a contingent risk,” the Bulletin stated in an article titled 'State of the Economy.'
Authored by a team led by RBI Deputy Governor Michael Debabrata Patra, the article noted that domestic economic drivers, including private consumption and gross fixed investment, remained strong, while net exports positively contributed to gross domestic product (GDP) growth during the April-June period of this financial year.
While agriculture has underperformed, the manufacturing sector has shown buoyancy, alongside resilient services. The Bulletin also indicated that household consumption is expected to grow at a faster rate in the second half of the fiscal year as headline inflation eases, with a revival of rural demand already in progress.
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