Reserve Bank of India Governor Shaktikanta Das has provided insights into the country’s inflation outlook, indicating that vegetable prices are expected to decrease from September, potentially mitigating the recent uptick in retail inflation. In July, India’s retail inflation reached 7.44%, marking the highest level in 15 months.
RBI Governor stated, “We expect to see an appreciable slowdown in vegetable inflation from September.” He further noted that the outlook for cereal prices also appears promising, although geopolitical tensions could impact food prices. Despite the presence of higher core inflation, Das emphasized that the gradual decrease in core inflation reflects the efficacy of the central bank’s monetary policy transmission.
The central bank remains vigilant to ensure that inflation does not persist and become generalized across various segments of the economy. Das highlighted the potential risk posed by frequent instances of food price shocks, which could undermine the ongoing efforts to anchor inflation expectations. The Reserve Bank of India has raised interest rates by a cumulative 250 basis points since May 2022 as part of its strategy to combat rising prices.
In a related context, a finance ministry official shared similar sentiments regarding vegetable prices, predicting that they would start cooling off in the coming months as new crops enter the market. However, the official expressed concern about rising crude oil prices, even though they currently remain within a tolerable range of USD 90 per barrel.
The official also provided insights into the government’s economic initiatives. The reduction in excise duty is not currently planned, and the government is actively promoting infrastructure investment. The official highlighted the steady progress of capital expenditure, indicating that it would reach 50% of the budget estimates by the end of September. The agriculture sector’s resilience is expected to mitigate the impact of a 6% rainfall deficit on kharif sowing.
To address inflation, the government has taken various measures, including releasing stocks of wheat and rice from reserves, imposing export restrictions on certain commodities, and permitting the import of pulses and oilseeds. These actions aim to stabilize prices and ensure food security for the nation.
