World Inflation is Declining, But the Governor of the Reserve Bank of India Sees a Harder Final Leg for Deflation

World , inflation is declining, but RBI Governor Shaktikanta Das says it may be difficult to reduce inflation in the last stages. The RBI kept its FY25 inflation prediction at 4.5% in its June monetary policy, despite the fact that food prices continued to rise even as CPI headline inflation further decreased in March and April.

Trends in Domestic and World Inflation :

World inflation is declining, which suggests that price stability is generally on the rise. The quest for ideal inflation rates is far from ended, though. In his monetary policy speech on June 7, RBI Governor Shaktikanta Das brought this up, recognising the difficulties that the disinflation effort will face.

Global central banks are dedicated to combating inflation, mostly depending on information to direct their policy.

RBI’s Projection of Inflation :

The Reserve Bank of India (RBI) kept the 4.5% inflation prediction for the fiscal year 2024–25 in its June monetary policy announcement. This choice was made in the midst of further lowering headline inflation from the Consumer Price Index (CPI) in March and April. Food costs have remained stubbornly high despite this encouraging trend, which poses a serious obstacle in the fight against inflation.

Dynamics of Inflation Based on CPI :

India’s CPI-based inflation decreased marginally from 4.85% in March to an 11-month low of 4.83% in April. But food inflation was particularly high, at 8.7%, indicating the difficulties in lowering the rate of inflation overall. The ongoing high cost of food emphasises how difficult it is to achieve low and steady inflation.

Projections of the Monetary Policy Committee (MPC) :

The six members of the RBI’s Monetary Policy Committee (MPC) have outlined their projections for inflation in FY25. Inflation is predicted by the committee to be 4.9% in the first quarter (Q1), 3.8% in the second, 4.6% in the third, and 4.5% in the fourth (Q4). These forecasts exhibit a cautious optimism that strikes a balance between the necessity of maintaining inflation control and the need for growth.

Balance between Growth and Inflation :

The growth-inflation balance has shifted favourably, as highlighted by RBI Governor Shaktikanta Das. He pointed out that although growth is still strong, inflation is still low and is mostly being driven by a decline in the core inflation component. Core inflation hit its lowest point in the current series in April 2024, demonstrating notable progress in reining pressures from inflation.

In Conclusion :

Despite a downward trend in global inflation, achieving stable, low inflation will not be easy. The 4.5% inflation estimate for FY25 that the RBI has maintained reflects a cautious but positive outlook. While the ongoing high cost of food continues to be a worry, there is hope for the desired economic stability due to the general trend of reducing inflation, which is being driven by a decline in core inflation. Central banks, such as the RBI, continue to be watchful and data-driven, making sure that their policies adapt to the changing economic environment.


Leave a comment