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MPC meet: RBI projects inflation at 5.1% for FY22

Governor Das said that the favourable base effect that brought about the moderation in headline inflation by 1.2 percentage points in April may persist throughout the first half of the year

Headline inflation projected at 5.1% in FY22 by RBI Headline inflation projected at 5.1% in FY22 by RBI

The Reserve Bank of India on Friday announced that it expects consumer price index (CPI) to be at 5.1 per cent in FY22. "CPI inflation is projected at 5.1 per cent during 2021-22: 5.2 per cent in Q1; 5.4 per cent in Q2; 4.7 per cent in Q3; and 5.3 per cent in Q4 of 2021-22, with risks broadly balanced," said RBI Governor Shaktikanta Das during the Monetary Policy Committee announcements on Friday.

The Governor said that the favourable base effect that brought about the moderation in headline inflation by 1.2 percentage points in April may persist throughout the first half of the year, conditioned by the progress of monsoon and effective supply side interventions by the government.

"Upside risks to inflation emanate from persistence of the second wave and consequent restrictions on activity on a virtually pan-India basis. In such a scenario, insulating prices of essential food items from supply side disruptions will necessitate active monitoring and preparedness for coordinated, calibrated and timely measures by both Centre and states to prevent emergence of supply chain bottlenecks and increase in retail margins," added Governor Das.

Shaktikanta Das said that the second wave of COVID-19 has brought about unexpectedly higher rates of morbidity and mortality in comparison to the first wave. Mutant strains have led to higher rate of transmissions, resulting in fresh restrictions on activity across the country.

"Yet unlike in the first wave, when the economy came to an abrupt standstill under a nation-wide lockdown, the impact on economic activity is expected to be relatively contained in the second wave, with restrictions on mobility being regionalised and nuanced," he said, adding that people and businesses are already adapting to pandemic working conditions.

However, RBI revised its estimate of GDP growth in FY22 to 9.5 per cent from its earlier 10.5 per cent. It expects GDP to grow at 18.5 per cent in Q1, 7.9 per cent in Q2, 7.2 per cent in Q3, and 6.6 per cent in Q4 of 2021-22.

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Also read: RBI MPC meet: GDP growth expected to be 9.5% in FY22