RBI MPC minutes: Retail inflation may rise in October-March; trade war likely to impact India’s exports

By: |
August 16, 2018 5:46 PM

The inflation risks continue to remain elevated and governed by factors such as MSP, crude oil, monsoon, and GST, RBI said in the minutes of August MPC meeting.

The increased FDI flows in recent months and continued buoyant domestic capital market conditions bode well for the investment activity, RBI minutes of August MPC said.

The inflation risks continue to remain elevated and governed by factors such as MSP, crude oil, monsoon, and GST, RBI said in the minutes of August MPC meeting. Persistent core CPI doesn’t augur well for inflation, RBI Deputy Governor, Viral Acharya, said. He also said that it’s prudent to prepare for elevated and volatile oil prices. CPI inflation may encounter ‘soft patch’ in July-September period. The retail inflation may  resume upward trajectory in October-March, he added.

As various economic growth indicators suggest, the economic activity has remained strong, RBI said. The progress of the monsoon so far and a sharper than the usual increase in MSPs of kharif crops are expected to boost rural demand by raising farmers’ income, RBI said in the MPC minutes released today. The increased FDI flows in recent months and continued buoyant domestic capital market conditions bode well for the investment activity, RBI added.

However, due to several uncertainties, RBI maintained a neutral stance in its last policy outing, RBI Governor Urjit Patel said.

Against the above backdrop, the MPC decided to increase the policy repo rate by 25 basis points. The MPC reiterated its commitment to achieving the medium-term target for headline inflation of 4 per cent on a durable basis.

“Rising trade protectionism may impact domestic investment and growth prospects by dampening India’s exports. Overall, economic activity appears to be buoyant with GDP growth for 2018-19 projected at 7.4 percent, same as in the June policy; and 7.5 percent for Q1:2019- 20,” RBI minutes also said.

 

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