The Reserve Bank of India said on Monday that rising food prices were hampering the recent decline in inflation and that its efforts to control prices remained a “work in progress”.
The RBI has warned that high and volatile food prices could lead to a potential rise in headline inflation after a temporary fall below the target in the second quarter of 2024/25.
“Therefore, a strong commitment to sustainably aligning headline inflation with the target will warrant careful monitoring of the spillover effects of food price pressures on core inflation and inflation expectations. inflation,” the RBI added.
Annual retail inflation in May came in at 4.75%, down from 4.83% in April and lower than the 4.89% forecast by 50 economists polled by Reuters. Core inflation, however, reached a record high at around 3.12%.
Even as inflation remains a concern, the RBI said high-frequency indicators point to sustained momentum in domestic demand conditions during the first quarter of 2024-25.
It also expects GDP growth to broadly maintain the pace achieved in the previous quarter. According to the economic activity index, first quarter GDP is expected to remain close to 7.4%. Data is expected in August.
The central bank also said the outlook for agriculture was improving on expectations of an above-normal southwest monsoon.
“This should bode well for boosting rural demand and, in turn, supporting private consumption,” she added.
India should avoid “adventurism” and continue to focus on bringing inflation towards target, despite the growing clamor to signal a pivot in monetary policy, Governor Shaktikanta Das said in a speech on Tuesday .
