RBI MPC Meet 2024: RBI leaves inflation projection for FY25 unchanged at 4.5%


The Reserve Bank of India today left its inflation forecast for this fiscal year unchanged at 4.5%, even though the scorching summer threatens to intensify the battle to keep a lid on rising food prices.However, the central bank may draw some comfort from crude prices easing below $80 per barrel for the first time since February.

The Reserve Bank of India left the inflation aim for fiscal 2025 unchanged at 4.5%. Inflation for fiscal 2024 stood at 5.4%, at par with the central bank’s forecast.

The Reserve Bank of India’s (RBI) Monetary Policy Committee in four-to-two majority decided to keep the repo rate – key lending rate- unchanged at 6.5% for the eighth time in a row. The rate-setting panel also left the policy stance unchanged with focus on withdrawal of accommodation.

Also Read: RBI MPC meeting: India’s FY25 GDP forecast raised to 7.2% from 7%

“RBI remains vigilant to any upside risks to inflation, particularly from food inflation which could possibly derail the path of disinlfation,” RBI Governor and MPC Chair Shaktikanta Das said while announcing the policy decisions. “Vegetable prices are experiencing a summer uptick… Global food prices have also started inching up,” Das said.The central bank now sees inflation for Q1, Q2, Q3 and Q4 of this fiscal year at 4.9%, 3.8%, 4.6% and 4.5%, respectively, with risks evenly balanced. In the April policy, the monetary authority had pegged the inflation readings at 4.9%, 3.8%, 4.6% and 4.5% respectively, assuming a normal monsoon.


The RBI has an inflation target of 4% (with a leeway of 2 percentage points on either side). The country’s retail inflation was closest to the 4%-mark last in January 2021 at 4.06%. Das had earlier referred to inflation pain as the ‘elephant in the room’, which he had said had left for the jungle.

However, inflation remains a major concern for the world’s most-populous country that recently went to polls and the ruling Bharatiya Janata Party failed to secure a majority on its own. While the BJP-led NDA is on course to form the new government for a third straight time, inflation remains a key challenge in a country where economists have flagged a K-shaped recovery and growing income inequality.

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India’s retail inflation in April eased marginally to hit an 11-month low of 4.83 per cent on an annual basis as against 4.85 per cent in the previous month. However, the cheers that retail prices were easing was damped by concerns around rising food prices.

Food inflation grew at 8.7 per cent in April, up from 8.52 per cent in March. Vegetable and pulse prices have remained stubbornly high. Notably, garlic and ginger have experienced triple-digit inflation rates, with garlic inflation hitting 110.1% annually in March, while ginger reached 54.6%.

Experts had earlier indicated that a higher food inflation number could keep overall inflation from declining significantly.

Prices of key vegetables such as onion, tomato and potato have risen and a Crisil analysis recently showed the cost of a veg thali in India rose 9% in May.

Despite volatile food inflation in April, core inflation, excluding food and fuel, remained largely unchanged at 3.4%. However, concerns persist regarding the impact of weather variations on inflation and economic stability.

The RBI in its latest annual report said that the increasing incidence of climate shocks imparts considerable uncertainty to the food inflation and overall inflation outlook.

India is bearing an intense heatwave, which may affect the agricultural economy, resulting in inflationary pressures due to rising commodity prices.

Meanwhile, Brent crude oil prices eased below $80 a barrel on June 3 as OPEC+ members agreed that they may start to phase out voluntary output cuts from later this year.

The Indian government had earlier warned that the country’s inflation and economic growth face threats due to the surge in oil prices triggered by disruptions in the Red Sea. This underscores the importance of diversifying trade routes to mitigate such risks.

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