The Reserve Bank of India (RBI) has revised its Consumer Price Index (CPI) inflation projection for FY25 upward to 4.8%, from the earlier forecast of 4.5%, citing elevated risks from global uncertainties and domestic economic challenges. The announcement was made during the Monetary Policy Statement delivered by RBI Governor Shaktikanta Das on December 6, 2024.
Key Highlights:
- Revised CPI Inflation Projection: 4.8% for FY25 (up from 4.5%).
- Economic Context: The revision reflects concerns over persistent inflationary pressures, volatile commodity prices, and geopolitical uncertainties.
- Inflation Outlook: Elevated food prices and global supply chain disruptions continue to pose risks to inflation management.
Economic Landscape:
The upward revision comes as India grapples with:
- Inflationary Pressures: Driven by higher food and energy prices.
- Global Volatility: Ongoing geopolitical tensions and supply chain issues have increased costs across sectors.
- Economic Slowdown: GDP growth slowed to 5.4% in Q2 FY25, its lowest in seven quarters.
Governor Das emphasized that the revised inflation estimate accounts for potential risks while maintaining room for policy adjustments to support growth. The RBI reiterated its commitment to maintaining price stability while fostering economic recovery.
Policy Implications:
The increase in the CPI forecast suggests that the RBI may continue its cautious approach, focusing on balancing inflation control with economic stimulus. The unchanged repo rate at 6.5% reflects this dual objective, as liquidity measures like a possible Cash Reserve Ratio (CRR) cut remain on the table.
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