Retail inflation based on the Consumer Price Index moderated to 6.71 per cent in July. Inflation has come down mainly due to cheaper food items.
In order to control inflation, the Reserve Bank has increased the policy rate i.e. repo by 1.40 percent in three consecutive monetary policy reviews. Inflation has remained above the central bank’s satisfactory level for seven consecutive months.
On the state of the economy, an article written by the team led by Reserve Bank Deputy Governor Michael Debabrata Patra said, “…perhaps the happiest development in recent times is the softening of inflation rate in July by 0.30 per cent over June.” Is. Whereas in the first quarter (April-June) of 2022-23, it has come down by 0.60 per cent from an average of 7.3 per cent.
“This confirms our belief that inflation peaked in April 2022,” it said.
However, RBI has clarified that the views expressed in the article are those of the authors. It is not necessary that the things stated in the article are in line with the views of the Reserve Bank.
According to the article, “The inflationary situation is more or less in line with our estimates… If the forecast is correct, inflation will come down from seven per cent to five per cent in the first quarter of the next financial year, according to the central bank. will be of satisfactory level.
The government has given the RBI the responsibility to keep retail inflation between 2 per cent and 6 per cent.
It also noted that the risk of imported inflation remains. Apart from this, there is a possibility of the producers passing on the cost of raw materials to the customers. But it depends on the ability of producers to pass on the burden to customers in terms of pricing and wages.
However, some of the risks are mitigated. These include reduction in commodity prices, especially crude oil, easing supply pressures and a better monsoon.
“Inflation has come down, but it is still at a high level,” the article said. Due to this, appropriate policy steps will be needed to bring it under control in the coming times.
It also said that the prospects for global growth have weakened on a monthly basis.
According to the article, the supply situation in the country has improved. Recently, with the improvement of monsoon, the manufacturing and services sector is witnessing a boom.
With the coming of the festival, the confidence of the customers should increase in the cities including villages. Sowing activities are gaining momentum. Investment activities are being supported by strong capital expenditure by the central government.