RBI revises inflation outlook for 2023-24 and anticipates “substantial increase” in near-term

The Reserve Bank of India has increased its forecast for retail inflation in the country for 2023–24 to 5.4% from the previous forecast of 5.1% from its June monetary policy meeting.

RBI Governor Shaktikanta Das, as part of his remarks after the policy meeting, said assuming a normal monsoon, retail inflation is revised to 5.4 per cent, with Q2 at 6.2 per cent, Q3 at 5.7 per cent and Q4 at 5.2 per cent. Retail inflation for Q1 2024-25 is projected at 5.2 per cent.
“The risks are evenly balanced,” Das said.

The increase in the inflation outlook comes after retail inflation in India increased significantly in June to 4.81 percent, largely as a result of a sharp increase in the price of vegetables, including tomatoes. Along with vegetables, the indices for meat, fish, eggs, pulses, and products as well as spices increased. Retail inflation hit a two-year low of 4.25 percent in May. It was 4.7% in April compared to 5.7% the month before.

“The month of July has witnessed accentuation of food inflation, primarily on account of vegetables. The spike in tomato prices and further increase in prices of cereals and pulses have contributed to this. Consequently, a substantial increase in headline inflation would occur in the nearterm,” said Das.