The Reserve Bank on Friday projected retail inflation at 4.2 per cent next financial year beginning April while keeping the forecast for 2024-25 at 4.8 per cent.
Unveiling the last bi-monthly monetary policy of this fiscal year, RBI Governor Sanjay Malhotra said food inflation pressures, in absence of any supply side shock, should see a significant softening due to good kharif production, winter-easing in vegetable prices and favourable rabi crop prospects.
He further said core inflation is expected to rise but remain moderate.
Coupled with volatility in energy prices and adverse weather events, it is still prudent to have upside risks to the inflation trajectory, he said.
Considering all this, CPI inflation for 2024-25 is envisaged at 4.8 percent with Q4 at 4.4 percent, Malhotra said after chairing his first Monetary Policy Committee meeting.
"Assuming a normal monsoon next year, CPI inflation for 2025-26 is projected at 4.2 per cent with Q1 at 4.5 per cent; Q2 at 4 per cent; Q3 at 3.8 per cent; and Q4 at 4.2 per cent, " he said, and added the risks are evenly balanced.
The RBI had projected headline inflation for 2024-25 at 4.8 per cent with Q3 at 5.7 per cent; and Q4 at 4.5 per cent in its last monetary policy review. CPI inflation for Q1:2025-26 is projected at 4.6 per cent; and Q2 at 4 per cent.
CPI-based inflation eased to a four-month low of 5.22 per cent in December, mainly due to easing of prices in the food basket, including vegetables. It was at 5.48 per cent in November.
It had risen from an average of 3.6 per cent during July-August to 5.5 per cent in September and further to 6.2 per cent in October 2024.
The Economic Survey presented to the parliament last week has also hinted at developing climate resilient crop varieties and raising productivity of pulses, oilseeds, tomatoes, and onions in the interest of achieving sustainable price stability in those food commodities.
The food inflation rate for India, however has been showing robust performance by having only a handful of items from the basket - namely, vegetables and pulses driving this increase.
The total contribution of vegetables and pulses to the overall inflation was at 32.3 per cent in the year 2024-25 (April to December).
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