RBI sticks to growth forecast

The RBI stuck to the growth and inflation forecasts for the year but sounded a strong note of caution on the overall price situation, citing multiple factors including the evolving geopolitical developments, commodity prices and the monsoon.

The monetary policy committee headed by RBI governor Shaktikanta Das drew comfort from signs of “broadening” of economic activity to retain the GDP growth projection at 7.2%. But the inflation estimate for the current and the next quarters were reworked, although for the full year it will remain at 6.7% — well above the central bank’s tolerance zone of 6%. But the projection for the current quarter has been revised downwards from 7.4% estimated in June to 7.1% now. On the other hand, for the December quarter, it has been revised upwards to 6.4%, from 6.2%, estimated earlier.

“With inflation expected to remain above the upper threshold in Q2 & Q3, the MPC stressed that sustained high inflation could destabilise inflation expectations and harm growth in the medium term,” Das said.

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