RBI Governor Shaktikanta Das says inflation will moderate from July onwards as the monsoon has improved and global food prices have shown signs of easing in July. Das stated, “Global food prices showed signs of easing in the month of July after registering an increase since March 2024.”
A degree of relief in food inflation is expected from the pickup in the southwest monsoon and healthy progress in Kharif sowing. Buffer stocks of cereals continue to be above the norms, according to RBI Governor Shaktikanta Das.
Das added, “Assuming a normal monsoon and taking into account the 4.9 percent inflation print, Q1 CPI inflation for the current financial year (2024-25) is projected at 4.5 percent, with Q2 at 4.4 percent, Q3 at 4.7 percent, and Q4 at 4.3 percent. CPI inflation for the first quarter of the next financial year (Q1 2025-26) is projected at 4.4 percent.”
The inflation landscape reflects mixed signals. Das noted, “Headline inflation eased to 5.1 percent in June 2024 due to higher-than-expected food inflation. Fuel remained in deflation for the 10th consecutive month. Core inflation moderated to a historic low in May and June.”
RBI Governor Shaktikanta Das outlined the economic growth projections with real GDP growth of 7.2 percent for the fiscal year 2024-25 and headline inflation easing to 5.1 percent in June. Das said, “Real GDP growth for 2024-25 is projected at 7.2 percent with Q1 at 7.1 percent, Q2 at 7.2 percent, Q3 at 7.3 percent, and Q4 at 7.2 percent. Real GDP growth for Q1 2025-26, which we are projecting for the first time, is projected at 7.2 percent. The risks are evenly balanced.”
He added, “We have slightly moderated the growth projection for the first quarter of the current financial year in relation to the projection we gave in the previous MPC in June. This is primarily due to updated information on certain high-frequency indicators which show lower-than-anticipated corporate profitability, general government expenditure, and core industries output.”
This forecast marks a slight moderation from previous estimates provided in the Monetary Policy Committee (MPC) meeting in June, attributed to recent updates on high-frequency indicators such as corporate profitability, general government expenditure, and core industries output.
Balancing robust growth projections with a nuanced understanding of inflation dynamics, Governor Das stated, “Food inflation, which has a weight of around 46 percent in the CPI basket, contributed to more than 75 percent of headline inflation in May and June. Vegetable prices increased sharply and contributed about 35 percent to inflation in June. High inflation pressures persisted across other major food items also.”
Governor Das mentioned that the softening in core inflation continues to be broad-based, with core services inflation touching a new low in the current CPI series during May and June 2024.
Das stated, “The high food price momentum likely continued in July as well. However, large favorable base effects may push headline inflation downwards in July. The impact of the revision in milk prices and mobile tariffs also needs to be carefully monitored.”
In conclusion, Das anticipates some relief in food inflation due to the expected pickup in the southwest monsoon and healthy progress in Kharif sowing. Buffer stocks of cereals remain above the normative levels, contributing to a more stable food price environment. Global food prices, which have been on an upward trajectory since March 2024, showed signs of easing in July.
(With ANI Inputs)
