Inflation expectations in India may stabilise and edge down in the coming months, but “renewed pressures” from cereals and proteins can’t be ruled out, according to a report in Reserve Bank of India’s (RBI) February bulletin.
As per the January round of the RBI’s inflation expectations survey, households expected some rise in food inflation in the short-term. India’s retail inflation moderated to a three-month low of 5.10% in January from 5.69% in December, and food inflation eased to 8.30% from 9.53%.
“Overall inflation developments are turning favourable, providing a stable environment for corporates to plan expansion strategies in anticipation of a pick-up in demand,” the RBI said.
“Core inflation is at its lowest since October 2019 and nonfood WPI-inflation remains in deflation. This should augur well for the input cost outlook and selling prices of manufacturing firms,” it said.
The report further mentioned that total cost of projects, for which loans were sanctioned by major banks stood at Rs 2.4 trillion during April-December 2023, 23% higher on year.
On growth, the report noted that the RBI’s Economic Activity Index (EAI) projects Q4 FY24 GDP growth at 7%, at the similar level to that of Q3.
“The disruption in global trade flows and higher transportation costs due to the ongoing Red Sea conflict has led to the build-up of supply chain pressures in recent months,” the report said.