RBI projects 5 pc inflation for FY27, seen rising in near term
Mumbai, Aug 5
The Reserve Bank of India on Wednesday projected consumer price inflation at 5 per cent for FY27, while expecting it to rise further in the near term.
Announcing the Monetary Policy Committee's (MPC) decision to keep the repo rate unchanged at 5.25 per cent, Malhotra said headline consumer price inflation (CPI) rose to 4.4 per cent in June after remaining below the central bank's 4 per cent target for 16 consecutive months.
However, he reiterated that the Indian economy remains resilient and continues to be supported by robust domestic demand, sustained manufacturing and services activity, healthy investment trends and strong exports.
Moreover, Q1 inflation was 30 basis points lower than the RBI's earlier projection, reflecting limited pass-through of input cost pressures, he noted.
Despite the increase in food and fuel costs, core inflation -- excluding food and fuel -- remained unchanged at 3.9 per cent during May and June.
Excluding precious metals, core inflation was even lower at 2.3-2.5 per cent, indicating that broader demand-side inflationary pressures remain subdued.
In addition, the RBI has projected CPI inflation at 5 per cent for FY27, with quarterly projections of 4.7 per cent in Q2, 5.9 per cent in Q3 and 5.5 per cent in Q4.
While inflation for the first quarter of FY28 is projected at 5.3 per cent.
Malhotra said risks to the inflation outlook continue to stem from the impact of El Nino on rainfall distribution, volatility in global crude oil prices and geopolitical developments.
The Governor added that growth remains resilient, supported by steady domestic demand, sustained expansion in manufacturing and services activity, healthy investment trends and robust exports.
High-frequency indicators suggest that private consumption remained strong during the first quarter of FY27, while investment activity continued to be supported by construction, capital goods production and bank credit growth.
"Growth continues to be supported by resilient domestic demand, sustained expansion in manufacturing and services activity, and robust exports, reaffirming India's position as the world's fastest-growing major economy," Malhotra said.
The RBI Governor said the MPC decided to maintain the repo rate and retain the neutral policy stance as greater clarity is needed on the future trajectory and composition of inflation before any monetary policy action is considered.
— IANS
Reader Comments
The core inflation staying at 3.9% is a good sign. At least the demand side isn't overheated. But with El Nino and global oil volatility, we're walking on thin ice. The RBI's neutral stance seems appropriate for now.
Keeping repo rate at 5.25% is the right call. The economy needs stable interest rates for growth. Inflation at 5% is within tolerance, not ideal but we are far better than many other countries struggling with double-digit inflation. 🇮🇳
I wish they would talk more about the common man's kitchen budget. Dal, vegetables, everything is getting dearer! Projections are fine but the ground reality is tough. The RBI should be a bit more aggressive in curbing food price volatility.
Good to see the RBI maintaining a cautious approach. The world economy is uncertain, and India's resilience is commendable. But I do hope they act decisively if inflation crosses 6% in the coming quarters. We need sustainability over quick fixes.
"Neutral stance" is the safest bet when global signals are mixed. Inflation is a lagging indicator, so we'll feel the pinch later. The RBI must stay vigilant on crude oil prices because that's our biggest imported headache! ⛽
J We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.