Reserve Bank of India projects inflation at 6.7 per cent in FY23

The central bank expects the retail inflation to be at 7.5% in the first quarter, 7.4% in Second, 6.2% in third and 5.8% in the fourth quarter.

Published: 08th June 2022 10:59 AM  |   Last Updated: 08th June 2022 11:06 AM   |  A+A-

A guard at RBI office

The Reserve Bank of India. (File photo | PTI)

By Express News Service

The RBI on Wednesday increased the inflation estimate by 100 basis points to 6.7% in 2022-23. In the April policy statement, the central bank had pegged inflation at 5.7%.

Governor Shaktikanta Das while announcing a 50 basis points increase in repo rate to 4.9% said: “Consequent to the recent reduction in excise duties, domestic retail prices of petroleum products have moderated. International crude oil prices, however, remain elevated, with risks of further pass-through to domestic pump prices. There are also upside risks from revisions in the prices of electricity. Early results from manufacturing, services and infrastructure sector firms polled in the Reserve Bank’s surveys expect further input and output price pressures going forward.”

ALSO READ: RBI hikes repo rate by 50 basis points to 4.90 per cent

The central bank expects the retail inflation to be at 7.5% in the first quarter, 7.4% in Second, 6.2% in third and 5.8% in the fourth quarter.

Meanwhile, it has retained the 2022-23 GDP growth estimate at 7.2%. In the first quarter of the financial year, the GDP growth is expected to be 16.2% followed by 6.2% in Q2, 4.1% in Q3 and 4.0% in Q4.

In its policy statement, the RBI said that the recovery in domestic economic activity is gathering strength. “Rural consumption should benefit from the likely normal south-west monsoon and the expected improvement in agricultural prospects. A rebound in contact-intensive services is likely to bolster urban consumption, going forward. Investment activity is expected to be supported by improving capacity utilisation, the government’s capex push, and strengthening bank credit. Growth of merchandise and services exports is set to sustain the recent buoyancy,” said the statement.

However, the central bank believes that spillovers from prolonged geopolitical tensions, elevated commodity prices, continued supply bottlenecks and tightening global financial conditions nevertheless weigh on the outlook.

Meanwhile, given the high inflation estimates (higher than the RBI’s upper tolerance level of 6%) in the first three quarters of the financial year, experts see another 50-60 basis points increase in repo rates.

“We foresee further repo hikes of 35 bps and 25 bps, respectively, in the next two policies,” says Aditi Nayar, chief economist, Crisil Ltd.



Comments

Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp