Food price uncertainties to weigh on inflation trajectory; RBI retains FY'25 forecast at 4.5%

RBI projects 4.5% inflation for 2024, citing food price uncertainties and geopolitical tensions as risks to watch.

The Reserve Bank of India (RBI) on April 5 said food price uncertainties continue to weigh on the inflation trajectory going forward, even as it retained 4.5% retail inflation projection for the current fiscal.

In its first bi-monthly monetary policy for current fiscal, the RBI said notwithstanding the cut in petrol and diesel prices in mid-March 2024, the recent uptick in crude oil prices needs to be closely monitored.

“Continuing geopolitical tensions also pose upside risk to commodity prices and supply chains,” RBI said. "Assuming a normal monsoon, CPI inflation for 2024-25 is projected at 4.5%," RBI governor Shaktikanta Das said.

RBI Monetary Policy updates | Policy repo rate unchanged at 6.5%; real GDP growth for FY25 projected at 7%

Although RBI retained the full year inflation projection, it tweaked the forecasts for the quarter. RBI forecast April-June quarter inflation at 4.9% and in September quarter at 3.8%.

For December and March quarters, inflation is projected at 4.6% and 4.7%, respectively. The RBI said that deflation in fuel is likely to deepen in the near term, following the cut in LPG prices in March.

The government last month announced a steep cut of ₹100 in cooking gas LPG prices to ease the financial burden on households. Also, public sector oil retailers cut petrol and diesel prices by ₹2/litre, ending a nearly two-year-long hiatus in rate revision.