Good news all along as RBI sees inflation falling, GDP growth rising in FY19

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Updated: April 5, 2018 3:25:36 PM

Backed by the recent decline in vegetable prices and significant moderation in fuel group inflation, RBI (Reserve Bank of India) has lowered lowered inflation projection in the fiscal year 2018-19 in its latest monetary policy review.

The RBI has revised inflation in March quarter, 2017-18 at 4.5 percent from 5.1 percent earlier.

Backed by the recent decline in vegetable prices and significant moderation in fuel group inflation, RBI (Reserve Bank of India) has lowered lowered inflation projection in the fiscal year 2018-19. The benchmark retail inflation, that was projected in the range of 5.1 to 5.6 percent in the first half of FY19, has now been moderated to the range of 4.7 to 5.1 percent. The central bank has also lowered inflation forecast to 4.4 percent to 4.7 percent in the second half. Even on the economic growth front, RBI is upbeat as it strengthened GDP growth projections from 6.6 percent in 2017-18 to 7.4 percent in 2018- 19.

Inflation

The RBI has revised inflation in March quarter FY19 to 4.5 percent from 5.1 percent earlier. CPI inflation for 2018-19  has been revised to 4.7-5.1 per cent in H1 2018-19 and 4.4 percent in H2, including the HRA impact for central government employees, with risks tilted to the upside.

“The 6th bi-monthly resolution of 2017-18 in February projected CPI inflation at 5.1 percent in Q4:2017-18; and in the range of 5.1-5.6 percent in H1:2018-19 and 4.5-4.6 per cent in H2,  including  the  HRA  impact,  with  risks  tilted  to  the  upside.  Actual  inflation  outcomes  in  January-February averaged 4.8 per cent,  largely reflecting the sharp decline in vegetable prices and significant moderation  in  fuel group inflation. The  available  information  suggests  that vegetable prices continued to moderate in March as well. Accordingly, inflation in Q4:2017-18 is now projected at 4.5 percent,” RBI policy statement said.

The CPI inflation for 2018-19 is expected to remain in the range of 5.1-5.6 per cent in first half, including reducing statistical HRA impact of central government employees, and 4.5-4.6 per cent in second half of the year, the February’s RBI policy statement had said. The retail inflation in February slowed to 4.4 percent, below RBI’s March projection of 5.1 percent. In the December monetary policy review, the central bank had given inflation forecast in the range of 4.3-4.7 percent that it revised upwards from previous estimate for second half of FY18.

GDP growth

GDP growth is projected to strengthen from 6.6 per cent in 2017-18 to 7.4 percent in 2018- 19 – in the range of 7.3-7.4 percent in H1 and 7.3-7.6 percent in H2 – with risks evenly balanced, RBI policy statement said. In its last monetary policy review in the month of February, RBI had lowered the GDP growth projection to 6.7 percent for 2017-18 from its August forecast of 7.3 percent considering implementation of GST and lower kharif output estimates. The central bank projected GVA (Gross Value Added) growth at 6.6 percent for 2017-18. In the policy review of December last year, RBI had forecast GVA expansion by 6.7 percent. RBI kept GVA expansion for 2018-19 in the range of 7.3-7.4 percent in first half and 7.1-7.2 percent in second half with risks evenly balanced in the last review.

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