“We expect inflation to come down close to the target over a two-year cycle,” he said.
“Again, there are so many uncertainties which are playing out and coming in from time to time.”
The consumer price index measured inflation printed 7% in August versus 6.71% a month ago.
The central bank has retained its projection of inflation for the current financial year while revising down the country’s growth.
The Reserve Bank’s enterprise surveys pointed to some easing of input cost and output price pressures across manufacturing, services and infrastructure firms; however, the pass-through of input costs to prices remains incomplete.
Taking into account these factors and an average crude oil price (Indian basket) of US$ 100 per barrel, inflation is projected at 6.7% in 2022-23, with the September quarter at 7.1%, December at 6.5% and March at 5.8%. Risks are evenly balanced. CPI inflation for the first quarter next fiscal year is projected at 5.0%.
High and protracted uncertainty surrounding the course of geopolitical conditions weighs heavily on the inflation outlook. Commodity prices, however, have softened and recession risks in advanced economies (AEs) are rising. On the domestic front, the late recovery in sowing augurs well for kharif output. The prospects for the rabi crop are buffered by comfortable reservoir levels.
