The Reserve Bank of India (RBI) bulletin on Wednesday said the retail inflation is gradually easing, but volatile and elevated food prices are interrupting the path of disinflation.
In its June 2024 bulletin, the RBI in an article on the “State of the Economy”, said the global growth was resilient in the first quarter of 2024, and many central banks have pivoted towards a less restrictive monetary policy stance in response to the fall in inflation in their economies.
“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.
In India, high-frequency indicators suggest the real GDP growth in Q1 FY2024-25 is broadly maintaining the pace it achieved in the preceding 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 Reserve Bank deputy governor Michael Debabrata Patra.
Inflation is easing, but the final leg of this disinflation journey may be tough. Central banks remain steadfast and data-dependent in their fight against inflation.
Despite some moderation, pulses and vegetables inflation remained firmly in double digits. Vegetable prices are experiencing a summer uptick following a shallow winter season correction, the RBI bulletin said.
The deflationary trend in fuel was driven primarily by the LPG price cuts in early March. Core inflation softened for the 11th consecutive month since June 2023.25 Services inflation moderated to a historic low and goods inflation remained contained, it added.
Earlier this month, the RBI’s monetary policy committee (MPC) projected the 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 MPC also 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.