MPC Minutes: Inflation concerns continue to dominate policy review

Reserve Bank of India

Majority of Reserve Bank of India (RBI) monetary policy committee members expressed caution on upside risks to inflation, particularly emanating from uncertainties in food prices, at the panel's policy review, showed the minutes of the meeting on April 19.

"While low core inflation would further the disinflation process, concerns remain on food inflation outlook. We need to remain watchful on upside risks to inflation outlook from adverse climatic factors, supply side shocks and geopolitical events," said Rajiv Ranjan in RBI minutes.

Adding to this, RBI Deputy Governor Michael Debabrata Patra said recent inflation prints and high frequency data on salient food prices indicate that food inflation risks remain elevated.

In March, India's retail inflation eased to a ten-month low of 4.85 percent, as against 5.09 percent in February. This data was released by the Ministry of Statistics and Programme Implementation on April 12.

The inflation numbers were lowest since May 2023, when it was at 4.31 percent.

In March, food inflation softened marginally with the index coming in at 8.52 percent, as compared to 8.66 percent in previous month.

However, on the up were prices of cereals at 8.37 percent versus 7.60 percent a month ago, and meat and fish at 6.36 percent compared to 5.21 percent in February. Meanwhile, vegetables and pulses exhibited a marginal declining trend.

In total, the food and beverages inflation stood at 7.68 percent in March, lower than 7.76 percent in February.

In April monetary policy, the central bank kept the repo rate unchanged at 6.50 percent for the seventh time in a row with its focus firmly on bringing inflation down.

The RBI projected CPI inflation for 2024-25 at 4.5 per cent with Q1 at 4.9 per cent; Q2 at 3.8 per cent; Q3 at 4.6 per cent; and Q4 at 4.5 per cent (Chart 2). The risks are evenly balanced.