According to the Minutes of the Monetary Policy Committee (MPC), it has projected Consumer Price Index Inflation at 6.8 pc for second quarter fy20-21, at 5.4-4.5 pc for second-half FY 2020-21 and 4.3 pc for quarter first 2021-22, with risks broadly balanced. The Minutes of the Monetary Policy Committee meet which was held earlier this month was released on Friday.

In the inflation outlook, kharif sowing portends well for food prices. Pressures on prices of key vegetables such as tomatoes, onions and potatoes should also go out by third-quarter with kharif arrivals. conversely, prices of pulses and oilseeds are likely to remain strong due to elevated import duties.

International crude oil prices have traded with a softening bias in Sept a weak demand outlook, but domestic pump prices may remain high in the absence of any roll back of taxes. Pricing power of firms remains weak in the face of passive demand. COVID-19-related supply disruptions, including labour shortages and high transportation costs, could continue to force cost-push pressures, but these risks are getting mitigated by progressive unlocking and removal of restrictions on inter-state movements. taking into account all these factors, CPI inflation is projected at 6.8 pc for second Qt 20-21, at 5.4-4.5 pc for second half 2020-21 and 4.3 pc for first quarter 21-22, with risks broadly balanced, as per the MPC Minutes. On the domestic front, the high frequency indicators suggest that economic activity is stabilising in second qt 2020-21 after the 23.9 pc year-on-year  decline in real GDP in Q1 as per MPC Minutes points.

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