The Reserve Bank of India (RBI) has maintained its inflation forecast for the fiscal year 2023-24 at 5.4%, despite concerns over global food and fuel price shocks. The announcement was made on Friday by RBI Governor Shaktikanta Das, who emphasized the central bank’s commitment to taking timely action against these potential economic disruptors.
Governor Das highlighted high inflation as a significant risk to macroeconomic stability and sustainable growth. He projected that September’s retail inflation would be lower than in previous months, indicating a potential easing of the cost of living for consumers.
In Q1 of the fiscal year 2023-24, the Consumer Price Index (CPI)-based headline inflation fell to 4.6%, down from 7.3% in the same period a year earlier. This decline suggests a significant easing from the extraordinarily high levels seen in July and August.
In his address, Das pointed out that high inflation is being fueled by factors such as food price shocks, volatile energy prices, geopolitical tensions, and adverse weather conditions. However, he predicted near-term inflation easing due to adjustments in vegetable prices and lower Liquid Petroleum Gas (LPG) prices.
The trajectory of inflation for the remainder of the fiscal year will be influenced by several key factors, including the area sown under Kharif crops and potential El Nino conditions. The RBI is targeting an inflation rate of 4%.
The central bank’s commitment to maintaining macroeconomic stability in the face of these challenges underscores its role in managing one of the world’s fastest-growing major economies. Its ongoing monitoring of these key economic indicators will be critical in shaping India’s economic policy moving forward.
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