Retail inflation is expected to be under control at 5.2% in the upcoming fiscal year, which begins in April. This is a decrease from the current year’s 6.7% that the RBI predicted.
According to a report from the RBI, persistently high inflation remains a key policy concern for the Reserve Bank, which has raised rates aggressively thus far this year.
However, the pressure may ease next fiscal year assuming normal rainfall and further normalization of global supply chains without any external shocks.
 The rate of change in the prices of particular goods and services over time is known as inflation in economics. The change in the average price of the selected goods and services basket is shown by inflation. It is given in percentage form.
An increase in inflation indicates a decrease in the economy’s purchasing power. Although inflation is a concern for the economy, not everyone is adversely affected. It is beneficial to some individuals. Investors benefit from inflation while consumers lose some of their purchasing power due to it.
If invested in inflation-affected assets are held for a significant amount of time, investors stand to gain. Consumers might be affected, for instance, by an increase in the cost of housing. However, capital appreciation will be beneficial to those who have already purchased a home.
Retail inflation is expected to be under control at 5.2% in the upcoming fiscal year, which begins in April, according to the Reserve Bank of India (RBI).
This is a decrease from the 6.7% it predicted for the current year. In its “Monetary Policy Report September 2022,” the Reserve Bank of India stated, “Structural model estimates indicate that inflation will average 5.2 percent for 2024-24, assuming a normal monsoon, a progressive normalization of supply chains, and no further exogenous or policy shocks” Retail inflation must remain within a range of 2 to 6 percent, as mandated by the central bank.
However, inflation has been above the RBI’s upper tolerance level since January 2022, primarily as a result of negative supply shocks in the context of geopolitical tensions brought on by the war between Russia and Ukraine since the end of February.
Food grains, edible oil, fertilizers, and energy resources like natural gas and crude oil come primarily from these two nations. According to the report, even though inflation has decreased from its April peak of 7.8%, it remains at unacceptable levels.
To bring inflation under control, the Reserve Bank increased the key repo rate on Friday by 0.50 percent to 5.90 percent. It increased the policy repo rate by 140 basis points, or 1.4%, from May to August of this fiscal year.
Between April and September 2022, the six-member Monetary Policy Committee (MPC) of the RBI met four times, including an off-cycle meeting in May, amid a sharp rise in global commodity prices and concerns about the pace of global monetary policy normalization.
 During the policy’s announcement, RBI Governor Shaktikanta Das stated that the pandemic and the situation in Ukraine have already caused two major shocks to the world and that a third shock is the aggressive monetary policy actions taken by central banks around the world.
Through the first three quarters of 2022-23 (through December), the RBI anticipates that inflation will remain above the upper tolerance level of 6%, but that it will begin to fall under control in January 2024. It anticipates retail inflation to average 5.8% in the January-March quarter of 2022-23 and to further decrease to 5% in the April-June quarter of 2024-24.Â
Even though the forecast for the next fiscal year looks promising, there are still upside risks from a variety of factors, such as an increase in geopolitical tensions, higher prices for crude and commodities, supply chain disruptions that last longer than anticipated, and an increase in the volatility of the global financial market as a result of aggressive monetary policy actions.
The upside risks may also include a lack of domestic Kharif crop production, unseasonal rains, or rising demand. According to the RBI report, “the downside risks could arise from an early resolution of geopolitical tensions.”
As the pandemic subsides, supply conditions will improve, and commodity prices will continue to fall as a result of slower global demand. Both of these factors will contribute to lower inflation.
 Global economic growth is expected to slow to 3.2% in 2022 from 6.1% in 2021, according to the International Monetary Fund (IMF), and the outlook is “gloomy and more uncertain” with risks tilted to the downside.
In contrast, it anticipates that global consumer price inflation will peak at 8.3% this year, compared to 4.7% in 2021.
India’s GDP growth forecast for this fiscal year has been lowered from 7.2% to 7% by the Reserve Bank of India. Also read when India’s Inflation at 7% for August: RBI Priorities Growth
