The Reserve Bank of India has projected the Consumer Price Inflation (CPI) at 5.1 percent for the financial year 2022, governor Shaktikanta Das announced while discussing the outcomes of the second bi-monthly policy meet for the financial year 2021-22.
The central bank further projected the CPI at 5.2 percent in the first quarter of FY22, 5.4 percent in Q2, 4.7 percent in Q3, and 5.3 percent in Q4, with risks broadly balanced.
The Consumer Price Inflation (CPI) or retail inflation measures the average change in prices over time that consumers pay for goods and services. It is the most widely used measure of inflation and reflects the effectiveness of the government's economic policy.
Further speaking about the outlook for inflation, Das said, "The favourable effects that brought about the moderation in headline inflation by 1.2 percentage points in April, may persist through the first half of the year, conditioned by the progress of the monsoon and effective supply-side interventions by the government."
However, he added the upside risks to inflation emanate from the persistence of the second wave of coronavirus infections and the consequent restrictions on activity.
In such a situation, he said, insulating prices of essential food items from supply-side disruptions are important. The Centre and state will have to actively monitor and prepare for coordinated, calibrated, and timely measures to prevent the emergence of supply chain bottlenecks that can inadvertently lead to an increase in retail margins.
While a normal southwest monsoon along with comfortable buffer stocks may help to keep the cereal price pressures in check, Das said, rising international crude oil prices within a broad-based surge in international commodity prices and logistics is worsening cost conditions.
These developments, he added, could keep core price pressures elevated, "although weak demand conditions may temper the pass-through to consumer inflation."
"The inflation print for April at 4.3 percent has brought with it some relief and policy elbow room," he said.
At this juncture, the MPC was of the view that policy support from all sides is required to regain the lost growth momentum (growth was evident in H2-2020).
Accordingly, the RBI's Monetary Policy Committee unanimously voted to keep the repo rates unchanged at 4 percent until necessary to mitigate the impact of COVID-19, while ensuring that inflation remains within the target going forward.
Central Bank has slashed the repo rate by a total of 115 basis points since March 2020 to soften the blow of the pandemic on the economy. It follows 135 bps worth of rate cuts since the beginning of 2019.
First Published: IST