Inflation projection lowered, but RBI flags 6 concerns that could still upset your household budget

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Updated: December 5, 2018 4:07:59 PM

Even as the RBI’s monetary policy committee (MPC) significantly revised the inflation projections downwards, it maintained a cautious stance on account of several uncertainties.

RBI to inject Rs 10,000 cr through open market operations on ThursdayRBI said in its policy statement that prices of various food items are at  “unusually low levels” and there is a risk of sudden reversal. (Reuters)

Even as the RBI’s monetary policy committee (MPC) significantly revised the inflation projections downwards, it maintained a cautious stance on account of several uncertainties. The H2 FY19 inflation forecast was cut to 2.7-3.2 percent from 3.9-4.5 percent earlier by the committee in its latest outing.

Here’s are 6 key concerns that may upset your household budget:

1)RBI said in its policy statement that prices of various food items are at  “unusually low levels” and there is a risk of sudden reversal.

Also read: Share market LIVE updates: Sensex, Nifty trade lower ahead of RBI policy meet outcome; HUL shares gain 1%

2)The MPC believes that uncertainty  continues about the exact impact  of MSP on inflation going ahead.

3)There is an uncertainty on the medium-term outlook for crude oil prices on account of global demand  conditions.

4)The global financial markets continue to remain volatile, MPC statement said.

5)Even as households’ near-term inflation  expectations have moderated in the latest  round of the Reserve Bank’s survey, one-year ahead expectations remain elevated and unchanged, it added.

6)The  fiscal slippages at the centre and state levels may  influence the inflation outlook, heighten market volatility  and crowd out private investment, it added. In addition, the staggered impact  of HRA revision by state governments may push up headline inflation.

GDP growth

GDP growth for 2018-19 has been projected at 7.4 percent (7.2-7.3 percent in H2) as in the October policy, and for H1 2019-20 at 7.5 percent, with risks somewhat to the downside. “The demand outlook as reported by firms polled in the Reserve Bank’s IOS has improved in Q4. Based on an overall assessment, GDP growth for 2018-19 has been projected at 7.4 percent (7.2-7.3 per cent in H2) as in the October policy, and for H1:2019-20 at 7.5 percent, with risks somewhat to the downside,” RBI MPC said.

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) today kept the key lending rates unchanged at 6.5 percent at its fifth bi-monthly monetary policy review in the year.

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