The Reserve Bank of India (RBI) on Monday said inflation is set to ease from the five month high witnessed in September high, but in a stubborn manner. RBI also said that while the aggressive global monetary tightening has dimmed the economic prospects, economic activity in India has remained resilient.
"Headline inflation is set to ease from its September high, albeit stubbornly, on the back of easing momentum and favourable base effects. These factors will entrench India's prospects as one of the fastest growing economies of the world," RBI says in the monthly bulletin for October released on Monday.
India's retail inflation growth rate bounced back to 7.4% level in September from 7% in the month of August and 6.71% in July on the back of the high food prices in the country.
"The headline inflation was mainly pushed up by the sharp increase in CPI food inflation to 8.4 per cent in September from 7.6 per cent a month ago. Price pressures were most visible in the case of vegetables, spices and cereals. They also edged up in case of meat and fish, milk and pulses. On the other hand, price pressures softened in the case of edible oils, fruits, sugar and non-alcoholic beverages," the bulletin says.
It may be noted that the RBI has hiked the key policy rates since May this year. Since the beginning of the monetary tightening form the month of May this year in an off cycle monetary policy committee meeting, the RBI has increased the repo rate four times to 5.90% from 4%. The hike in the prime lending rate is in sync with the global monetary tightening, RBI says while also agreeing that it will have an impact on the global growth prospects. On the domestic front however, the banking regulator is confident of the resilient economic activity.
"Aggressive and synchronised monetary tightening has further weakened global economic prospects as financial markets sold off, investors took fright and jettisoned risky assets. In India, broader economic activity has remained resilient and poised to expand further with domestic demand accelerating as the contact-intensive sectors are experiencing a bounce-back. Robust credit growth and fortified corporate and bank balance sheets provide further strength to the economy," says the banking regulator. Last week, finance minister Nirmala Sitharaman too said during her official visit to the US that the Indian economy is on a sustained revival path.
