NEW DELHI: Core inflation is decreasing steadily, pulling headline inflation closer to the 4% target, though food price fluctuations are slowing down this progress, the Reserve Bank of India (RBI) said on Tuesday in its monthly bulletin.
“CPI readings for January and February 2024 show winter easing of vegetable prices turned out to be shallow and short-lived. Cereal prices maintained strong momentum, and prices of meat and fish have registered a surge. Food price pressures on the headline have been capped by core disinflation to among its lowest prints in the series,” the report said.
Core inflation is falling broadly, with fuel prices in deflation, likely to be more pronounced in March due to LPG price cut. Headline inflation turned positive in February 2024 despite a favourable base effect. As per the report, monetary policy needs to focus on minimising risks, steering inflation towards the target, and supporting growth momentum.
Despite the global uncertainties amid geopolitical and extreme weather risks, the Indian economy is experiencing a conducive macroeconomic configuration that can be its launching pad for a step-up in its growth trajectory. Over the period 2021-24, growth has averaged above 8 per cent; and the underlying fundamentals indicate that this can be sustained and even built upon, said RBI.
In addition, the current account deficit is modest, external buffers are resilient and fiscal consolidation is into its third consecutive year even as corporations are deleveraging and improving their debt servicing capacity. Balance sheets in financial sector are sound and healthy, providing wherewithal for intermediating productive credit needs of a resurgent economy. Financial markets are reflecting these favourable formations. Capital inflows have resumed as investor interest floods back into India.