RBI Projects FY27 Retail Inflation At 4.6 Pc, Within Government-Mandated Target

The Reserve Bank on Wednesday projected retail inflation for the current financial year at 4.6%, well within the government-mandated inflation target range of 4% with a tolerance band of +/- 2%.

Before the outbreak of the West Asia conflict, India's macroeconomic fundamentals exuded confidence with buoyant growth and low inflation. Conditions turned adverse in March with the widening of the conflict zone and its intensification.

The consumer price index (CPI) based retail inflation during April-June quarter (Q1) is estimated at 4%; Q2 at 4.4%; Q3 at 5.2%; and Q4 at 4.7%, Reserve Bank Governor Sanjay Malhotra said, while unveiling the first bi-monthly monetary policy of the current fiscal year.

He said the Monetary Policy Committee (MPC), which met for three days to deliberate on the benchmark interest rate (repo), noted that since the last policy meeting, geopolitical uncertainties have heightened significantly.

"Headline inflation remains contained and below the target. However, upside risks to the inflation outlook, driven by increased energy price pressures and probable weather disturbances affecting food prices, have increased," the Governor said.

Also, core inflation pressures remain muted, although supply chain dislocations and the risk of second-round effects render the future inflation trajectory uncertain.

Malhotra also said the economy is confronted with a supply shock, and it is prudent to wait and watch the changing circumstances and the evolving growth-inflation outlook, as the MPC decided to keep the repo rate unchanged at 5.25%.

In February, retail inflation moved up to 3.21%. The February inflation data was based on the new CPI series with base year 2024.

The government has mandated the central bank to ensure inflation remains at 4% with a margin of 2% on either side.