The government’s latest report indicated that retail inflation in India was around 5-point-1% in February against 5.0% in the prior month. Moreover, inflation is hovering around the medium-term target with the inflationary expectations coming down for the April quarter from 5.5% to 5.4%. The positive difference is implied by figures released by the National Statistical Office, and this has been witnessed since February, when inflation for the food basket was 8.66% against 8.3% in the preceding month, January.
The government prepares a framework for monetary policy, which assigns the Reserve Bank of India (RBI) as one of its agencies to target retail inflation at 4%. The permissible range is allowed to be 2% for both the upper and the lower limits. Correspondingly, RBI had anticipated that CPI inflation, a significant tool used by RBI to measure the prices of goods and services consumed by households in India, would be within the bracket of 5.4% during the fiscal year of 2023-24. The result for the first quarter of the current fiscal year is 5%, recorded in January-March.
Economists showed different standpoints about the path of inflation. Some think inflation will stabilize at 4.5%–5% for fiscal year 2025, before bottoming out in the 2nd qaurter at just about 3%, as a result of base effect. While fast GDP growth and stable core inflation are observed, that is also a mystery. Experts say that the factor of low input prices could just be responsible.
Given the current situation, the RBI might want to keep the policy rates unaffected, and further changes might not be expected in the following months. Devendra Kumar Pant, an economist at India Ratings, has noted that the situation is very interesting because core inflation is going in one direction, but growth is climbing. Therefore, the remarkable man pointed out that the policy rates remain unchanged.
As part of economic news, the government revised its growth projection to 7.6% for the current year, an increase from the former estimate of 7.3% for this fiscal period. India’s economy demonstrated its strength in the final quarter of December, expanding by 8.4% in the last six months, achieving its fastest pace in one-and-a-half years.
While India now has to deal with increased pressure to manage the trading of friends (inflation and economic growth), policy-makers and experts are constantly watching the situation for a chance to get everything under control and for stable development.
