Inflation may come down to 5.2% in 2023-24: RBI

New Deli, Oct 03: Retail inflation may come down to 5.2% in the next fiscal beginning April 2023, stated a report by the Reserve Bank of India (RBI).

 

 

 

The Central Bank's speculation of easing inflation comes on the back of the assumption of normal rains and further normalization of global supply chains without any exogenous shocks. The Reserve Bank of India (RBI) expects retail inflation to come under control at 5.2% down from 6.7% which it has forecast for the current year.

 

 

 

"For 2023-24, assuming a normal monsoon, a progressive normalization of supply chains, and no further exogenous or policy shocks, structural model estimates indicate that inflation will average 5.2%," RBI said in its 'Monetary Policy Report September 2022'. The central bank is mandated to keep retail inflation in a range of 2-6%. However, inflation has been above the RBI's upper tolerance level since January 2022 mainly due to adverse supply shocks amid geopolitical tensions arising out of the Russia-Ukraine war since late February. Both countries are key suppliers of food grains, edible oil, fertilizers, and energy resources such as crude oil and natural gas. Even as inflation has eased from its April peak of 7.8%, it remains at unacceptably high levels, the central bank said in the report. On Friday, the Reserve Bank hiked the key repo rate by 0.50% to 5.90% to bring inflation under control. During the May-August period of this fiscal, it raised the policy repo rate by 140 basis points or 1.4%. The six-member Monetary Policy Committee (MPC) of the RBI met four times from April-September 2022, including an off-cycle meeting in May, in the backdrop of a sharp jump in global commodity prices and uncertainties around the pace of monetary policy normalization globally. RBI Governor Shaktikanta Das, while announcing the policy, said the world already witnessed two major shocks of the pandemic and the Ukrainian situation over the last two-and-a-half years and a third shock comes in the form of aggressive monetary policy actions by central banks globally. The RBI projects the inflation to remain above the upper tolerance level of 6 percent through the first three quarters of 2022-23 (till December) and expects it to come under control from January 2023 onwards.

 

 

For the January-March quarter of 2022-23, it has projected the retail inflation to average 5.8% and further down to 5% in the April-June 2023-24 period. The shortfall in domestic Kharif crop output, unseasonal rains, or firming up demand may also add up to the upside risks. "The downside risks could arise from an early resolution of geopolitical tensions," the RBI report said.