Governor Shaktikanta Das, in the MPC meeting announcements, projected CPI inflation to be at 5.3 per cent for 2021-22. Das projected an increase in inflation from 4.5 per cent to 5.1 per cent in Q3 and reduced from 5.8 per cent to 5.7 per cent in Q4 of 2021-22. “CPI inflation is then expected to ease to 5.0 per cent in Q1:2022-23 and stay at 5.0 per cent in Q2:2022-23,” he stated in the announcements.
The uptick in CPI inflation in October to 4.5 per cent from 4.3 per cent in September was due to a spike in vegetable prices due to unseasonal rains in some parts of the country, Das added.
“Hardening international energy prices have kept domestic LPG and kerosene prices elevated for nearly three quarters, edging up fuel inflation to 14.3 per cent in October. The persistence of high core inflation (i.e. CPI inflation excluding food and fuel) since June 2020 is an area of policy concern in view of input cost pressures that could rapidly be transmitted to retail inflation as demand strengthens,” the Governor stated in the announcements on Wednesday.
He further added that reducing excise duty and VAT on petrol and diesel will bring about a durable reduction in inflation.
Vegetable prices are expected to see a seasonal correction with winter arrivals with the rabi crop. He credited the government for its supply side interventions that limited the fallout of the high international edible oil prices. “Though crude oil prices have seen some correction in the recent period, a durable containment of price pressures would hinge on strong global supply responses to match the pick-up in demand as pandemic restrictions ease,” stated the Governor.
“Our monetary policy stance is primarily attuned to the evolving domestic inflation and growth dynamics. Yet, imminent shifts in monetary policy settings by systemically important global central banks are bringing about fresh challenges for domestic macro-financial stability in the form of spillovers. In such a scenario, domestic macro-fundamentals need to be resilient, with appropriate policy stances and actions, and strong buffers,” Das stated.
He reiterated the importance of keeping inflation aligned with the target while focusing on a robust growth recovery.
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