The Reserve Bank of India (RBI) on Wednesday revealed that the estimated inflation for first half of the next fiscal would stand at 5.1 to 5.6 percent.
However, RBI Governor Urjit Patel noted that it may ease to 4.6 percent, likely in the second half.
He reiterated the Monetary Policy Committee''s (MPC) commitment to keep headline inflation close to 4 percent on a durable basis.
"The headline inflation for Q4 of this fiscal is estimated to be 5.1 percent, owing to upside risks involved in firming up of global crude oil prices, hardening of raw material prices and stronger pricing among firms. This is expected to move up 5.6 in the first half of the next fiscal. However, unwinding of the 7th central pay commission, normal monsoon, and adequate food supply management, inflation may ease to 4.6 percent, with risks tilted to upside," Urjit Patel while addressing the media at a press conference.
Furthermore, on GVA growth, Patel said that its is estimated at 6.6-7.2 percent in 2018-19, with the stabilizing of the Goods and Services Tax (GST), resource mobilisation, recapitalisation of public sector banks and referencing of NPAs for resolution, which is expected to improve credit flow.
Talking about the upside risks involved, the RBI Governor said a pick-up in global growth may exert further pressure on crude oil and commodity prices with implications for domestic inflation, adding that the increased MSP on kharif crops, increase in customs duty, and impact of fiscal slippage as highlighted in the Union Budget 2018-19 may affect the confidence of external investors.
However, the committee in its report said nascent recovery needs to be carefully nurtured and growth put on a sustainably higher path through conducive and stable macro-financial management.
"There are certain mitigating factors such as subdued capacity utilization, and fluctuation in oil prices, moderate rural wage growth, improvement in global demand, strengthening of domestic investment, which can spur recovery. However, there is a need for vigilance with the neutral stance," he added.
Patel also lauded the government''s focus on improving the rural and infrastructural sectors in the Union Budget 2018-19, adding that the development would support rural incomes and investment. (ANI)