The Reserve Bank of India (RBI) on Friday revised upward the inflation forecast for the current financial year to 5.7 per cent from its earlier projection of 4.5 per cent announced in February.
Announcing the first monetary policy for the financial year 2022-23, RBI Governor Shaktikanta Das said, "Taking into account the initial conditions, signals from forward-looking surveys, estimates from structural and other time-series models, and crude oil (Indian basket) at USD 100 per barrel in 2022-23, the Consumer Price Index (CPI) based inflation would average 5.7 per cent in the current financial year. In the previous policy review announced in February, the RBI had put the inflation projection for the FY 2022-23 at 4.5 per cent."
CPI inflation is projected to average 5.7 per cent in 2022-23 - 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.
The sharp rise in inflation projection is mainly due to the economic disruptions caused by the Russia-Ukraine conflict.
For 2023-24, assuming a progressive normalisation of supply chains, a normal monsoon and no further exogenous or policy shocks, structural model estimates indicate that inflation will move in a range of 4.6-5.7 per cent, the RBI said.
There are a number of upside and downside risks to the baseline inflation forecasts. The upside risks emanate from a further hardening of global crude and other commodity prices due to geopolitical tensions, longer-than-expected supply chain disruptions, a larger pass-through of input cost pressures to output prices in the event of stronger demand conditions and global financial market volatility from a quicker-than-expected normalisation of monetary policy by the advanced economies, the RBI said.
The downside risks arise from an early mending of supply chain disruptions, a muted pass-through to output prices and a correction in global commodity prices due to global demand weakening more than expected and an easing of geopolitical tensions, it said.
( With inputs from ANI )
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