India’s headline inflation has broadened out and become “stubborn”, the Reserve Bank of India (RBI) said in its monthly bulletin on Tuesday.
“Inflation may be slightly down, but it is certainly not out,” the central bank said in a report.
With headline inflation projected to rise in the second quarter of the financial year starting next April after declining in the first three months, there can be no letting down of the guard, the bank said.
India’s annual inflation rate fell to 5.88% in November, below the upper end of the RBI’s comfort band of 6% for the first time this year.
According to the central bank’s estimates, annual inflation is seen cooling to 5.9% in January-March next year and 5% in April-June 2023 but is set to rise to 5.4% in the subsequent three months.
The Indian central bank is mandated to keep inflation at 4% over the medium term, within a comfort band of 2% on either side.
To rein in inflation closer to the target, the RBI has raised its main interest rate by 225 basis points since May 2022. The policy repo rate currently stands at 6.25%.
The RBI said the near-term growth outlook for the Indian economy is supported by domestic drivers as reflected in high frequency economic indicators.
“Waning input cost pressures, still buoyant corporate sales and turn-up in investments in fixed assets are heralding the beginning of an upturn in the capex cycle in India,” it added.
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