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RBI Raises Inflation Projection to 6.7% From 5.7% for 2022-23

The central bank projected inflation to be 7.5% in June quarter (Q1) and 7.4% in September quarter (Q2).
RBI Officers’ Association Seeks Review of Unified

New Delhi” The Reserve Bank of India (RBI) on Wednesday upped inflation projection for the current fiscal to 6.7% from 5.7% forecast in April.

RBI Governor Shaktikanta Das said the upside risk to inflation persists and the recent spike in tomato prices would fuel food inflation. Also, high global crude oil prices would add to the upside pressure on inflation.

The upward revision in inflation projection comes as domestic retail inflation has remained above RBI's comfort level of 6% for four months in a row, mainly due to the Russia-Ukraine war which has impacted the prices of commodities across the globe.

In the bi-monthly monetary policy, Das upped the inflation projection for the ongoing fiscal to 6.7%.

 It projected inflation to be 7.5% in June quarter (Q1) and 7.4% in September quarter (Q2).

Inflation is expected to come down to 6.2% in December quarter (Q3) and further reduce to 5.8% in March quarter (Q4) of this fiscal.

Das said normal south-west monsoon would boost kharif sowing and agri output.  However, global geo-political situation remains fluid and commodity market remains on the edge.

RBI, in its monetary policy in April, had projected inflation to be 5.7% in the current fiscal, with 6.3% in Q1; 5.8% in Q2; 5.4% in Q3 and 5.1% in Q4.

A rise in price across all items from fuel to vegetables and cooking oil pushed WPI or Wholesale Price Inflation to a record high of 15.08% in April and retail inflation to a near eight-year high of 7.79%.

 RBI has the mandate to keep inflation at 4% with a bias of 2% on either side.

Growth Projection Retained at 7.2%

The RBI retained its growth projection at 7.2% for the current fiscal on the back of improvement in urban demand and gradual recovery in rural India.

The RBI expects growth in the first quarter of the current fiscal at 16.2%, which will taper to 4% by the fourth quarter.

He, however, cautioned that there are risks from the ongoing Russia-Ukraine war.

The central bank earlier in April slashed the GDP growth projection for 2022-23 to 7.2% from its earlier forecast of 7.8%.

On Tuesday, the World Bank cut India's economic growth forecast for the current fiscal to 7.5% as rising inflation, supply chain disruptions, and geopolitical tensions taper recovery.

It was the second time that the World Bank has revised its GDP growth forecast for India in the current fiscal 2022-23 (April 2022 to March 2023). In April, it trimmed the forecast from 8.7% to 8% and now it is projected at 7.5%.

The GDP growth compares to an 8.7% expansion in the previous 2021-22 fiscal.

India's economy grew by 4.1%  in the January-March quarter of 2021-22.

Key Highlights

* Key lending rate (repo) raised by 50 basis points to 4.9%; 2nd increase in 5 weeks

* Repo rate still remains below pre-pandemic level

* To focus on withdrawal of accommodative policy to tame inflation and support growth

* Credit cards to be linked with UPI; RuPay credit cards to be linked first

* Lending limits for housing loans by co-op banks doubled

* Rural co-op banks permitted to lend to commercial Real Estate - Residential Housing (CRE-RH) sector

* Urban Co-op banks allowed to offer door-step banking

 * e-mandates on cards for recurring payments enhanced to Rs 15,000 from Rs 5,000.

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