Headline inflation is expected to average well above 6 per cent in the second quarter, said the Reserve Bank of India's monthly bulletin on Thursday.
"Headline inflation, after reaching a low of 4.3 per cent in May 2023, rose in June and is expected to surge during July-August led by vegetable prices," said RBI governer Shaktikanta Das.
The uptick in inflation in its June reading mutated in July, with the unprecedented shock to tomato prices spilling over to prices of other vegetables, said the article on 'State of the Economy'.
The article has been authored by a team lead by Reserve Bank Deputy Governor Michael Debabrata Patra.
The central bank, however, said the views expressed in the article are of the authors and do not represent the views of the Reserve Bank of India.
The article said, with industrial production and trade weakening, the global recovery is slowing after a robust first quarter performance. In this stressed global environment, the Indian economy is gathering momentum in the second quarter of 2023-24. Domestic drivers such as private consumption and fixed investment are offsetting the drag from the contraction in exports.
"In this stressed global environment, the Indian economy is gathering momentum in the second quarter of 2023-24," it said.
Inflation data for July 2023 that have been released in the first half of August indicate that the genie of inflation is still out of the bottle – upticks have flattered to deceive the good feeling of moderation that had just started to set in during May and June, said the article.
Earlier, on August 14, rising food prices sent consumer inflation soaring to a 15-month high of 7.44% in July compared with 4.87% in the previous month, breaching the upper tolerance band of RBI’s inflation target of 2-6% for the first time in FY24 and dashing any hopes of an early rate cut.
In its meeting last week, the Monetary Policy Committe (MPC) had kept the policy rate unchanged at 6.5% for the third consecutive time but had raised its inflation forecast to 5.4 per cent from 5.1 per cent earlier. It had projected 6.2 per cent inflation in Q2FY24.
"The MPC remains resolute in its commitment to aligning inflation to the 4 per cent target and anchoring inflation expectations," said Das in the bulletin.
The bank had linked the decision with high prices of food items ranging from humble staples to vegetables and even gourmet offerings.
Source Name : Economic Times