Inflation to ease with monsoon impact on veggie prices: SBI

Inflation measured by consumer prices inched up to 5.77% for June, fastest in nearly two years on higher food demand

SBI Chairperson Arundhati Bhattacharya today said the progress of monsoon has been normal and inflation will cool down once the rainfall gets factored into the vegetable prices.

"The effect of normal monsoon on vegetable prices is yet to be felt. Once that happens, we hope the inflation trajectory will move downwards," Bhattacharya said in a foreword to a report by the bank's economic research wing.

She said Central India has received the highest rainfall so far which is ten per cent above the normal level, but East and North East are lagging behind with a 14 per cent deficiency.

It can be noted that many parts of the country have been facing a drought-like situation for last two years.

Inflation measured by consumer prices inched up to 5.77% for the month of June, the fastest in nearly two years, on higher food inflation.

The release of the data has dashed hopes of a rate cut by the Reserve Bank, which is targeting to pull the number down to 5% by March 2017.

Bhattacharya's name is among those speculated to succeed Raghuram Rajan as the Governor of Reserve Bank.

She said we need to continue to build on the country's position as an "island of hope" in a challenged global scenario where factors like geopolitical conflicts, terrorism and refugee inflows are pulling down growth.

The outlook for global economic growth is at 2.4% in 2016 and 2.7% in 2017, she said.

The growth rate in China and South East Asia are also not showing significant improvement, Bhattacharya said.

While noting that capital flows have risen into the country post Brexit, she pointed out to the concerns to world economy expressed at the recent G20 meeting because of Britons' decision to leave the European Union.