RBI Governor Shaktikanta Das forecasts a 7.2% GDP growth for 2024-25 and reports that inflation eased to 5.1% in June.

Mumbai (Maharashtra), August 8 : RBI Governor Shaktikanta Das has stated that inflation is expected to decrease starting from July due to improvements in the monsoon and signs of easing global food prices in July.

Das noted, "Global food prices began to ease in July after increasing since March 2024."

A reduction in food inflation is anticipated with the improvement in the southwest monsoon and robust progress in Kharif sowing. According to Das, buffer stocks of cereals remain above standard levels.

Das further commented, "With a normal monsoon and considering the 4.9 percent inflation rate, CPI inflation projections for the current financial year (2024-25) are 4.5 percent for Q1, 4.4 percent for Q2, 4.7 percent for Q3, and 4.3 percent for Q4. CPI inflation for the first quarter of the next financial year (Q1 2025-26) is forecasted to be 4.4 percent."

The inflation outlook presents mixed signals. Das explained, "Headline inflation eased to 5.1 percent in June 2024 due to unexpectedly high food inflation. Fuel prices have remained in deflation for the tenth consecutive month, and core inflation reached a historic low in May and June."

Das provided details on economic growth, projecting a real GDP growth of 7.2 percent for fiscal year 2024-25, with headline inflation easing to 5.1 percent in June. He stated, "Real GDP growth for 2024-25 is forecasted at 7.2 percent, with Q1 at 7.1 percent, Q2 at 7.2 percent, Q3 at 7.3 percent, and Q4 at 7.2 percent. For Q1 2025-26, the forecast is 7.2 percent, a new projection."

He added, "We have slightly reduced the growth forecast for the first quarter of the current financial year compared to our previous June MPC projection. This adjustment is due to updated high-frequency indicators showing lower-than-expected corporate profitability, general government spending, and core industry output."

This revised forecast reflects a slight adjustment from earlier MPC estimates due to recent updates on key indicators.

Das highlighted the complexity of the inflation situation: "Headline inflation dropped to 5.1 percent in June 2024 primarily due to higher food inflation. Fuel prices have been in deflation for the tenth month in a row, while core inflation reached a historical low in May and June."

Das also emphasized that food inflation, which comprises about 46 percent of the CPI basket, contributed significantly to overall inflation in May and June. Vegetable prices rose sharply, contributing approximately 35 percent to inflation in June, with persistent high inflation in other major food items.

Das observed that core inflation continues to soften broadly, with core services inflation reaching a new low in May and June 2024.

He noted, "High food price momentum is likely to have persisted in July. However, significant favorable base effects may reduce headline inflation in July. The impact of changes in milk prices and mobile tariffs should also be closely monitored."

Das expects some relief in food inflation from the improved southwest monsoon and strong progress in Kharif sowing. Buffer stocks of cereals are above the usual levels, contributing to a more stable food price environment. Global food prices, which had been rising since March 2024, began to ease in July.