Economists anticipate that the Reserve Bank of India’s monetary policy committee will not rush to tighten policy amidst the evolving geopolitical landscape. RBI Governor Sanjay Malhotra emphasized the central bank’s cautious approach, stating they are closely monitoring the West Asia conflict’s repercussions without committing to future policy rate adjustments. Senior Economist Radhika Rao from DBS Bank forecasts India’s April inflation to increase to 3.9% year-on-year, nearing the target range midpoint compared to the previous month’s 3.4%.
Food inflation is expected to rise to around 4.5%, driven by perishables like tomatoes and eggs, cereals, and edible oils, exacerbated by untimely rains in certain regions. Rao predicts core inflation to remain steady at 3.4%, supported by lower precious metal prices. Additionally, transport inflation may show an uptick due to aviation turbine fuel prices and service sector adjustments.
The impact of high global oil prices on retail inflation is yet to fully materialize, with unchanged pump fuel prices. Concerns also linger over El Nino’s influence on monsoon patterns. Rising imported costs due to elevated commodity prices and a weak rupee are likely to reflect more prominently in the Wholesale Price Index (WPI), which surpassed retail inflation in March and is expected to continue its upward trajectory in April.
During its April meeting, the RBI maintained the repo rate at 5.25% with a neutral stance, a move praised by Assocham for enhancing macroeconomic stability. Chief Economist Madan Sabnavis of Bank of Baroda suggests a reduced possibility of further rate cuts, citing inflation risks related to El Nino and projecting GDP growth at 6.9% and inflation at 4.6%.
