The Reserve Bank of India has left inflation projection for FY24 unchanged at 5.4 per cent, even as Governor Shaktikanta Das reiterated that that the inflation target is 4 per cent, not 2-6 per cent.

He noted that the near-term inflation outlook is expected to improve on the back of a correction on vegetable prices and the recent reduction in LPG prices.

However, inflation trajectory in the future will be conditioned by a number of factors, including lower area under pulses, dip in reservoir levels, El Niño conditions, volatile global energy and food prices, and unchanged real GDP growth projections in the fourth bi-monthly monetary policy review.

RBI has projected CPI (consumer price index-based) inflation at 5.4 per cent (unchanged from the preceding bi-monthly monetary policy review) for 2023-24, with Q2 (July-September) at 6.4 per cent (6.2 per cent), Q3 (October-December) at 5.6 per cent (5.7 per cent), and Q4 (January-March) at 5.2 per cent (unchanged). CPI inflation for Q1 2024-25 has been projected at 5.2 per cent (unchanged from the preceding bi-monthly monetary policy review).

Real GDP growth

Das observed that domestic demand conditions are expected to benefit from sustained buoyancy in services, revival in rural demand, consumer and business optimism, the government’s thrust on capex, and the healthy balance sheets of banks and corporates.

However, headwinds from global factors such as geopolitical tensions, volatile financial markets and energy prices, and climate shocks pose risks for the growth outlook.

Taking these factors into consideration, real GDP growth for 2023-24 has been projected at 6.5 per cent (unchanged from the preceding bi-monthly monetary policy review), with Q2 at 6.5 per cent (unchanged), Q3 at 6 per cent (unchanged), and Q4 at 5.7 per cent (unchanged), with risks evenly balanced. Real GDP growth for Q1 2024-25 is projected at 6.6 per cent (unchanged).

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