Retail inflation is gradually easing, but volatile and elevated food prices are hindering the disinflation process, according to the Reserve Bank of India's bulletin released on Wednesday. The June 2024 bulletin's article on the 'State of the Economy' noted that global growth remained resilient in the first quarter of 2024, leading many central banks to adopt a less restrictive monetary policy stance as inflation declined.
In India, high-frequency indicators indicate that real GDP growth in Q1 FY25 is maintaining a similar pace to that of the previous quarter.
Also, the prospects for agriculture are brightening with the early landfall of the southwest monsoon, said the article authored by a team led by RBI Deputy Governor Michael Debabrata Patra.
"Headline inflation is gradually easing, driven by sustained softening of its core component, although the path of disinflation is interrupted by volatile and elevated food prices," the authors said.
The RBI has been mandated by the government to ensure retail or headline inflation remains at 4% with a margin of 2% on either side.
Earlier this month, the RBI's monetary policy committee voted to keep the policy repo rate unchanged at 6.50% and reiterated its stance of remaining focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth.
The central bank has projected inflation to ease from 5.4% in 2023–24 to 4.5% in 2024–25, with evenly balanced risks from the rising incidence of adverse climate events, pressures from input costs and volatility in crude prices, among others.
The RBI said views expressed in the bulletin are those of the authors and not of the central bank.
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