RBI raises inflation projection to 6.7% for current fiscal; retains growth projection at 7.2 pc

New Delhi (PTI): Reserve Bank of India (RBI) on Wednesday upped inflation projection for the current fiscal to 6.7 per cent from 5.7 per cent forecast in April.

RBI Governor Shaktikanta Das said the upside risk to inflation persists and the recent spike in tomato prices would fuel food inflation. Also, high global crude oil prices would add to the upside pressure on inflation.

The upward revision in inflation projection comes as domestic retail inflation has remained above RBI's comfort level of 6 per cent for four months in a row, mainly due to the Russia-Ukraine war which has impacted the prices of commodities across the globe.

In the bi-monthly monetary policy, Das upped the inflation projection for the ongoing fiscal to 6.7 per cent.

It projected inflation to be 7.5 in June quarter (Q1) and 7.4 per cent in September quarter (Q2).

Inflation is expected to come down to 6.2 per cent in December quarter (Q3) and further reduce to 5.8 per cent in March quarter (Q4) of this fiscal.

Das said normal south-west monsoon would boost kharif sowing and agri output. However, global geo-political situation remains fluid and commodity market remains on the edge.

RBI, in its monetary policy in April, had projected inflation to be 5.7 per cent in the current fiscal, with 6.3 per cent in Q1; 5.8 per cent in Q2; 5.4 per cent in Q3 and 5.1 per cent in Q4.

A rise in price across all items from fuel to vegetables and cooking oil pushed WPI or Wholesale Price Inflation to a record high of 15.08 per cent in April and retail inflation to a near eight-year high of 7.79 per cent.

RBI has the mandate to keep inflation at 4 per cent with a bias of 2 per cent on either side.

Growth projection

The Reserve Bank of India on Wednesday retained its growth projection at 7.2 per cent for the current fiscal on the back of improvement in urban demand and gradual recovery in rural India.

Unveiling the third monetary policy for the current fiscal, RBI Governor Shaktikanta Das said the Indian economy remained resilient, and the central bank will continue to support growth.

The RBI expects growth in the first quarter of the current fiscal at 16.2 per cent, which will taper to 4 per cent by the fourth quarter.

He, however, cautioned that there are risks from the ongoing Russia-Ukraine war.

The central bank earlier in April slashed the GDP growth projection for 2022-23 to 7.2 per cent from its earlier forecast of 7.8 per cent.

On Tuesday, the World Bank cut India's economic growth forecast for the current fiscal to 7.5 per cent as rising inflation, supply chain disruptions, and geopolitical tensions taper recovery.

It was the second time that the World Bank has revised its GDP growth forecast for India in the current fiscal 2022-23 (April 2022 to March 2023). In April, it trimmed the forecast from 8.7 per cent to 8 per cent and now it is projected at 7.5 per cent.

The GDP growth compares to an 8.7 per cent expansion in the previous 2021-22 fiscal.

India's economy grew by 4.1 per cent in the January-March quarter of 2021-22.