The Reserve Bank of India (RBI) projects the country's inflation rate to hover around 4.5% for the fiscal year 2024–25, based on the Consumer Price Index (CPI).
This projection comes amidst expectations of an above-average monsoon and easing supply chain pressures.
According to the RBI's annual report released Thursday, headline inflation moderated to 5.4% on an annual average basis in the preceding fiscal year, down by 1.3 percentage points.
Factors contributing to this moderation include easing supply chain pressures, a general softening in core inflation, and positive indications of an above-normal southwest monsoon for the upcoming year
.
However, the report also highlights uncertainties, particularly regarding food inflation and overall inflation, due to increasing climate shocks.
Concerns are raised about low reservoir levels, especially in southern states, and the outlook for above-normal temperatures in the initial months of the fiscal year.
Furthermore, the RBI notes upward risks to the inflation trajectory, including volatility in international crude oil prices, geopolitical tensions, and elevated global financial market volatility.
In response to these challenges, the RBI emphasises the importance of maintaining the existing monetary stance to control inflation effectively.
The Monetary Policy Committee (MPC), in its April 2024 meeting, opted to keep the policy repo rate unchanged at 6.50%. The MPC reported the necessity of sustaining the disinflation path until inflation aligns with the 4% target on a durable basis.
The RBI pledges to remain "nimble and flexible" in its liquidity management strategies, utilising a combination of main and fine-tuning operations, including repo and reverse repo.
This strategy aims to regulate money market interest rates orderly and preserve financial stability.
Follow us
