NEW DELHI: The Reserve Bank of India (RBI) on Friday marginally increased its inflation forecast for the current fiscal year to 4.8 per cent from the earlier projection of 4.5 per cent, attributing the adjustment to a sharp rise in September and October 2024, fueled by an unexpected spike in food prices and weakened consumption demand.
Governor Shaktikanta Das said that persistent food price pressures are expected to keep headline inflation elevated during the December quarter.
“Taking all these factors into consideration, CPI inflation for 2024-25 is projected at 4.8 per cent, with Q3 at 5.7 per cent; and Q4 at 4.5 per cent. CPI inflation for Q1:2025-26 is projected at 4.6 per cent; and Q2 at 4 per cent. The risks are evenly balanced,” RBI Governor said.
The Revised RBI inflation projections are:
- FY25 : Raised to 4.8 per cent from 4.5 per cent
- Q3FY25: Revised to 5.7 per cent from 4.8 per cent
- Q4FY25: Increased to 4.5 per cent from 4.2 per cent
- Q1FY26: Adjusted to 4.6 per cent from 4.3 per cent
- Q2FY26: Expected to maintain at 4 per cent
“In the near term, despite some softening, lingering food price pressures are likely to keep headline inflation elevated in Q3,” he added while unveiling the monetary policy.
The data released by the National Statistical Office showed retail inflation, as measured by the consumer price index (CPI), soared to 6.2 per cent in Oct, higher than the 5.5 per cent in September.
Data from the National Statistical Office (NSO) showed rural inflation at 6.7 per cent compared to 5.6 per cent in urban areas. The food price index jumped to 10.9 per cent in October, up from 9.2 per cent in September.
Food and beverage inflation approached double digits at 9.7 per cent , with vegetables leading the surge at 42.2 per cent . Inflation for oils and fats rose to 9.5 per cent , while fruits registered an 8.4 per cent increase.
Headline inflation increased from average 3.6 per cent during July-August to 5.5 per cent in September. This surge was primarily driven by a significant increase in food inflation and a rise in core inflation (CPI excluding food and fuel).
RBI Governor Shaktikanta Das highlighted that anticipated record kharif production should help alleviate the elevated prices of staples like rice and tur dal. Additionally, vegetable prices are expected to undergo a seasonal winter correction.
Looking ahead, the RBI projects food inflation to moderate in the fourth quarter, supported by the seasonal easing of vegetable prices, kharif harvest arrivals, and favorable conditions for rabi crop production, aided by adequate soil moisture and reservoir levels.
Das said, “Agricultural growth is supported by healthy Kharif crop production, higher reservoir levels and better ruby sowing. Industrial activity is expected to normalize and recover from the lows of the previous quarter.”
“The near-term inflation and growth outcomes in India have turned somewhat adverse since the October policy. The medium-term prognosis on inflation suggests further alignment with the target, while growth is expected to pick up its momentum,” he added.
The government has mandated the RBI to maintain inflation at a target of 4 per cent , with a permissible margin of 2 per cent on either side.
The RBI maintained its benchmark repo rate at 6.5 per cent through a 4:2 majority decision. Meanwhile, following the second quarter FY25 GDP figures showing a lower-than-expected growth of 5.4 per cent , attention has shifted to the central bank’s approach towards supporting economic expansion.
Furthermore, RBI implemented a reduction in the Cash Reserve Ratio (CRR) by 50 basis points, lowering it from 4.5 per cent to 4 per cent through two instalments. It also adjusted its GDP growth projection for FY25 downwards, revising it from 7.2 per cent to 6.6 per cent .
