Retail inflation in the first half of financial year 2022-23 is expected to ease to around 5 per cent mainly due to reduction in fuel prices, easing of supplies and prospects of good crop, Reserve Bank of India (RBI) governor Shaktikanta Das said on Wednesday.
The RBI has kept the projection for retail inflation at 5.3 per cent for the current fiscal, i.e. 2021-22.
In his address after the conclusion of the RBI monetary policy committee's meeting, Mr Das said that during the first two quarters of the next fiscal (2022-23), retail inflation is expected to ease at 5 per cent levels.
The reduction of excise duty and VAT on petrol and diesel will bring about a durable reduction in inflation by way of direct effects as well as indirect effects operating through fuel and transportation costs, the RBI Governor said while announcing the bi-monthly policy decision.
"Vegetable prices are expected to see a seasonal correction with winter arrivals in view of bright prospects for the Rabi crop. Supply side interventions by the government have limited the fallout of continuing high international edible oil prices on domestic prices. Though crude oil prices have seen some correction in the recent period, a durable containment of price pressures would hinge on strong global supply responses to match the pick-up in demand as pandemic restrictions ease. Cost-push pressures continue to impinge on core inflation, though their pass-through may remain muted due to the slack in the economy. Over the rest of the year, inflation prints are likely to be somewhat higher as base effects turn adverse; however, it is expected that headline inflation will peak in the fourth quarter of 2021-22 and soften thereafter," Mr Das said.
Taking into consideration all these factors, consumer price inflation is projected at 5.3 per cent for 2021-22, he said.
Giving details of retail inflation projections, the central bank chief said that it is expected to be at 5.1 per cent in December quarter and 5.7 per cent in March quarter of 2021-22, with risks broadly balanced.
However, retail inflation is then expected to ease to 5 per cent in the June quarter of 2022-23 and stay at 5 per cent in the September quarter as well, Mr Das added.