The Reserve Bank of India (RBI) on Friday projected substantial softening in retail inflation in the near term on the back of easing food prices and favourable base effect.
The Consumer Price Index (CPI)-based inflation is now projected to be at 5.3 per cent for 2021-22 with risks evenly balanced.
In its August policy, the central bank had estimated inflation to be at 5.7 per cent due to supply side constraints, high crude oil and raw materials cost.
“The CPI headline momentum is moderating with the easing of food prices which, combined with favourable base effects, could bring about a substantial softening in inflation in the near-term,” RBI Governor Shaktikanta Das said while unveiling the bi-monthly monetary policy.
On a quarterly basis, the CPI for Q2 has been projected at 5.1 per cent: Q3 at 4.5 per cent and Q4 at 5.8 per cent. CPI inflation for Q1:2022-23 is projected at 5.2 per cent.
Headline inflation continues to be significantly influenced by very high inflation in select items such as edible oils, petrol and diesel, LPG and medicines, he said.
“Efforts to contain cost-push pressures through a calibrated reversal of the indirect taxes on fuel could contribute to a more sustained lowering of inflation and an anchoring of inflation expectations,” Das noted.
On the other hand, a very low seasonal build-up in vegetable prices, declining cereal prices, a sharp deflation in gold prices and muted housing inflation have helped to contain inflationary pressures.
Going forward, he said, several evolving factors provide comfort on the food price front.