The Reserve Bank of India (RBI) on Friday said it expects retail inflation to be at 5.1 percent in the current financial year aided by the progress of monsoon and effective supply-side interventions by the government.
The projection is well within the Monetary Policy Committee's (MPC) target to keep the rate of inflation at 4 percent with an upper or lower tolerance level of 2 percent. However, the RBI remained equally cautious about the upside risks due to rising global commodity prices. Moreover, the persistence of the second wave of the pandemic and the consequent restrictions on activity on a virtually pan-India basis puts upside risks to inflation, RBI observed in its monetary policy review.
The favourable base effects that brought about moderation in headline inflation by 1.2 percentage points in April, may persist through the first half of the year, conditioned by the "progress of the monsoon and effective supply-side interventions by the government", RBI Governor Shaktikanta Das said.
Given that the measures taken so far as well as the upside risks, Das said the CPI inflation is projected at 5.1 percent during 2021-22. This consists of 5.2 percent in the first quarter, 5.4 percent in the second quarter, 4.7 percent in the third quarter and 5.3 percent in the fourth quarter of this fiscal, with risks broadly balanced, he said.
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