RBI Projects Inflation to Fall to 5.3% in FY24

New Delhi: The Reserve Bank on Wednesday projected retail inflation to ease to 5.3 percent in the next fiscal from 6.5 percent this year on assumptions of lower imported inflation, even though core inflation remains sticky. The RBI's inflation outlook for the current fiscal has improved from 6.8 percent projected earlier, to 6.5 percent, on the back of steeper than expected decline in vegetable prices and the Indian basket of crude at USD 95 a barrel.

"Looking ahead, while inflation is expected to moderate in 2023-24, it is likely to rule above the 4 percent target. The outlook is clouded by continuing uncertainties from geopolitical tensions, global financial market volatility, rising non-oil commodity prices, and volatile crude oil prices. (Also Read: RBI Hikes Key Lending Rate by 25bps, Home Loans To Get Costlier- Know How to Minimise Rising EMIs)

At the same time, economic activity in India is expected to hold up well," RBI Governor Shaktikanta Das said. The low volatility of the Indian rupee relative to peer currencies limits the impact of imported price pressures and other global spillovers. (Also Read: RBI Projects FY24 GDP Growth at 6.4%, in Line With Economic Survey)

"...Assuming an average crude oil price (Indian basket) of USD 95 per barrel, inflation is projected at 6.5 percent in 2022-23, with Q4 at 5.7 percent. On the assumption of a normal monsoon, CPI inflation is projected at 5.3 percent for 2023-24, with Q1 at 5 percent, Q2 at 5.4 percent, Q3 at 5.4 percent and Q4 at 5.6 percent. The risks are evenly balanced," Das said.

Consumer price index-based inflation in India moved below the upper tolerance level of 6 percent during November-December 2022, driven by a strong decline in the prices of vegetables. Core inflation, however, remains sticky, the RBI said.