The Reserve Bank of India (RBI) on Friday revised upwards its retail inflation projection to 5.7 per cent for the current financial year 2022-23. Presenting the Monetary Policy Committee’s first bi-monthly monetary policy statement, RBI Governor Shaktikanta Das said the central bank has upped its CPI inflation projection to 5.7 per cent. He said, “Heightened geopolitical tensions clouded the earlier projections.”
He added that key commodity prices are likely to remain on higher side and input costs will remain high across sectors.
The Reserve Bank of India (RBI) is mandated to keep inflation within the range of 2-6 per cent, while the CPI-based inflation rate in February stood at 6.07 per cent. The rate in January was 6.01 per cent.
In the previous policy announcement in early February, the RBI had projected the CPI inflation for 2022-23 at 4.5 per cent, with the first quarter at 4.9 per cent; second quarter at five per cent; third quarter at 4 per cent; and fourth quarter at 4.2 per cent, “with risks broadly balanced”.
For the financial year 2021-22, the central bank had projected inflation at 5.3 per cent, with the March 2022 quarter at 5.7 per cent on account of unfavourable base effects that ease subsequently.
It had said, “The hardening of crude oil prices, however, presents a major upside risk to the inflation outlook. Core inflation remains elevated at tolerance testing levels, although the continuing pass through of tax cuts relating to petrol and diesel last November would help to moderate input cost pressures to some extent. The transmission of input cost pressures to selling prices remains muted in view of the continuing slack in demand. Further, as risks from Omicron wane and supply chain pressures moderate, there could be some softening of core inflation.”
Most experts expected the central bank to revised downwards inflation forecasts. The ongoing Russia-Ukraine war is stocking inflation globally with commodity prices being elevated amid fresh supply chain issues. HDFC Bank Chief Economist Abheek Barua earlier said, “The Reserve Bank of India is expected to revise upward its inflation projection for the current financial year by 75-80 basis points.”
Lakshmi Iyer, chief investment officer (debt) and head (products) at Kotak Mahindra Asset Management Company, has said the RBI MPC meets at a time when outbreak of war has seen a spike in most commodities pack. “Oil is on a boil, gold continues to sizzle, inflation is way too nimble. The growth-inflation debate is likely to hog center stage yet again in the upcoming policy meet.”
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