Core Inflation In India Remains Elevated According To RBI Governor

According to the minutes of latest RBI monetary policy meeting, the central bank governor Shaktikata Das stated that there has been considerable improvement in the outlook for food prices since the last bi-monthly review. Vegetable prices, after the spike of October-November, have seen significant seasonal correction which is likely to continue on fresh winter crop arrivals. In addition, the December CPI print saw price corrections in edible oils and pulses coming from the supply side interventions by the Government. The record Rabi acreage, propelled by a significantly higher acreage of oilseeds and pulses, along with prospects of higher yields for wheat, augur well for a bumper harvest of key food items. Further, considering the advance estimates of a robust kharif harvest, and on the assumption of a normal monsoon, there is room for considerable optimism on the food inflation trajectory over the next financial year.

However, he noted that the renewed surge in international crude oil prices requires close monitoring. The RBI needs to remain watchful of the risks to domestic inflation arising from rise in international commodity prices due to exogenous factors including geo-political developments. While core inflation remains elevated, demand-pull pressures are still muted, given the slack in the economy. On balance, inflation is likely to peak in Q4: 2021-22 and thereafter soften to around 5.0 per cent in H1:2022-23 and further closer to the target in H2:2022-23 with an average inflation rate of 4.5 per cent for the entire financial year.

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