Inflation remains below 5%, yet formidable challenges persist, affirms Shaktikanta Das, Governor of the Reserve Bank of India (RBI). The collaborative efforts of the government and the central bank have successfully curbed inflation, but both global and local hurdles persist.

"Our actions, along with the supply-side measures implemented by the government, have effectively brought down inflation to below 5%, with the latest figure standing at 4.25%. To summarize, rising prices were influenced by both global commodity prices and local factors such as untimely or unseasonal rains, which led to an increase in vegetable prices. Despite the prevailing uncertainties, we implemented certain measures and cautiously raised interest rates. The government also implemented supply-side measures," conveyed Governor Das during a press briefing.

During the recent announcements by the Monetary Policy Committee, Governor Das revised the inflation forecast for FY24 from 5.2% to 5.1%. The projection for the first quarter is 4.6%, second quarter 5.2%, third quarter 5.4%, and fourth quarter 5.2%. These figures are slightly adjusted from the earlier projections of 5.1%, 5.4%, 5.4%, and 5.2% for the respective quarters. Governor Das also acknowledged the presence of persistent challenges.

"One challenge stems from international uncertainties, such as ongoing wars or geopolitical tensions. The outcomes and consequences of these events will become clearer in the future. Another challenge is the prediction of El Nino, despite the forecast of a normal monsoon. We must monitor the severity of El Nino closely. Lastly, weather-related events have a significant impact on vegetable prices. We need to address these uncertainties," he explained.

In the MPC announcements, Governor Das emphasized the imperative of close and continuous monitoring of evolving inflation, particularly in light of uncertain monsoon predictions and the potential impact of El Nino.

Furthermore, he noted that while consumer and business outlook surveys reflect sustained optimism, there are risks to the outlook due to weak external demand, volatility in global financial markets, protracted geopolitical tensions, and the intensity of El Nino's influence.

Governor Das expressed positivity regarding the India Meteorological Department's (IMD) forecast of a normal Southwest Monsoon, which bodes well for the kharif crops. However, risks and uncertainties remain due to factors such as the interplay between El Nino and the Indian Ocean Dipole (IOD).

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