RBI Bulletin Highlights Easing Retail Inflation Amid Volatile Food Prices

The RBI Bulletin notes that retail inflation is gradually easing, though volatile and elevated food prices disrupt disinflation progress. While global growth remains resilient, India's GDP growth maintains its pace. The RBI has projected a continued decline in inflation, while addressing challenges from climate events, input costs, and crude price volatility.

The latest RBI Bulletin reveals a gradual easing in retail inflation; however, volatile and elevated food prices are creating hurdles in the path toward disinflation. This finding was highlighted in the 'State of the Economy' section, authored by a team led by Reserve Bank deputy governor Michael Debabrata Patra.

According to the article, global growth has shown resilience in Q1 2024, prompting central banks worldwide to adopt a less restrictive monetary policy stance due to falling inflation rates in their respective economies. In India, high-frequency indicators suggest that real GDP growth for Q1 FY2024-25 is maintaining the pace achieved in the previous quarter. The early landfall of the southwest monsoon has also brightened agricultural prospects.

While headline inflation is gradually easing, driven by sustained softening of its core component, the path of disinflation is interrupted by volatile and elevated food prices, the authors emphasized. Earlier this month, the RBI's monetary policy committee opted to maintain the policy repo rate at 6.50 per cent and consistently pursue the withdrawal of accommodation to align inflation with the target while supporting growth. The central bank projects that inflation will decline from 5.4 per cent in 2023-24 to 4.5 per cent in 2024-25, despite balanced risks from adverse climate events, input cost pressures, and crude price volatility.

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