Should the RBI review its policy outlook?

Inflation-targeting central bank should be conservative and cautious in its estimates and views

The RBI in its April policy had surprised us by scaling up the inflation trajectory by 25 bps, with 1HFY18 averaging 4.5%. But it appears that inflation may be substantially lower by ~130 bps than its projection, with the next few prints likely to be sub 3%. Even as we expect the inflation trajectory to inch towards 4.5% mark by March 2018, the 2HFY18 average will still remain much lower than the RBI’s estimate of 5%.
 
Further, core inflation (ex-petrol and diesel) has been trending downwards over the past six months depicting continuing growth slack. Finally, GST rates will