Governor Reserve Bank of India (RBI), Shaktikanta Das, while estimating India's overall retail inflation for FY22-23 at 6.7%, said that the 75% of the increase in inflation projections can be attributed to the food group.
"It may be noted that around 75% of the increase in inflation projections can be attributed to the food group. Further, the baseline inflation projection of 6.7% for 2022-23 does not take into account the impact of monetary policy actions taken today," Mr Das said in his remarks earlier this morning while spelling out the outcome of the ongoing monetary policy review meeting that started on Monday.
For FY22-23, RBI sees overall inflation at 6.7%, with 7.5% in Q1, 7.4% in Q2, 6.2% in Q3, and 5.8% in Q4, taking into consideration the normal monsoon and average crude oil basket price of US$105 per barrel.
India's retail inflation is likely to stay above the tolerance level of 6% till the third quarter of FY22-23 before moderating below 6%, Mr Das said.
India's retail inflation has been above RBI's 6% tolerance level for four months in a row, while wholesale inflation in the country has been in double digits for over a year now.
'Between February and April, headline inflation has increased by about 170 basis points. With no resolution of the war in sight and the upside risks to inflation, prudent monetary policy measures would ensure that the second-round effects of supply side shocks on the economy are contained and long-term inflation expectations remain firmly anchored and inflation gradually aligns close to the target. The monetary policy actions including withdrawal of accommodation will be calibrated keeping in mind the requirements of the ongoing economic recovery."
The inflation projection of 6.7% for FY22-23, however, does not take into account the impact of monetary policy actions taken on Wednesday, Das said.
The RBI on Wednesday raised the repo rate by 50 basis points (BPS) to 4.9% to tame rising inflation, which has been now above RBI's 6% tolerance level for four months in a row.
Coming to growth, India's real GDP growth in FY22-23 is seen at 7.2%, 16.2% in Q1, 6.2% in Q2, 4.1 in Q3, and 4.0 in Q4, with risks broadly balanced, Mr Das said in his post-policy statement.
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