Reserve Bank of India Governor Shaktikanta Das, while estimating India’s overall retail inflation for FY23 at 6.7 percent, said that the 75 percent of the increase in inflation projections can be attributed to the food group.
“It may be noted that around 75 percent of the increase in inflation projections can be attributed to the food group. Further, the baseline inflation projection of 6.7 percent for 2022-23 does not take into account the impact of monetary policy actions taken today,” Das said in his remarks earlier this morning while spelling out the outcome of the ongoing monetary policy review meeting that started on Monday.
For FY23, the RBI sees overall inflation at 6.7 percent, with 7.5 percent in Q1, 7.4 percent in Q2, 6.2 percent in Q3, and 5.8 percent in Q4, taking into consideration the normal monsoon and average crude oil basket price of $105 per barrel.
India’s retail inflation is likely to stay above the tolerance level of 6 percent till the third quarter of FY23 before moderating below 6 percent, Das said.
India’s retail inflation has been above RBI’s 6 percent tolerance level for four months in a row, while wholesale inflation in the country has been in double digits for over a year now.
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‘Between February and April, headline inflation has increased by about 170 basis points. With no resolution of the war in sight and the upside risks to inflation, prudent monetary policy measures would ensure that the second-round effects of supply-side shocks on the economy are contained and long-term inflation expectations remain firmly anchored and inflation gradually aligns close to the target. The monetary policy actions including withdrawal of accommodation will be calibrated keeping in mind the requirements of the ongoing economic recovery.”
The inflation projection of 6.7 percent for FY23, however, does not take into account the impact of monetary policy actions taken on Wednesday, Das said.
The RBI on Wednesday raised the repo rate by 50 basis points to 4.9 percent to tame rising inflation, which has been now above RBI’s 6 percent tolerance level for four months in a row.
Coming to growth, India’s real GDP growth in FY23 is seen at 7.2 percent, will 16.2 percent in Q1, 6.2 percent in Q2, 4.1 in Q3, and 4.0 in Q4, with risks broadly balanced, Das said in his post-policy statement.
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