Consumer price-based inflation (CPI) is gradually moderating but volatile and elevated food inflation continues to pose a threat to the disinflation process, a Reserve Bank of India (RBI) article said. Headline inflation, as measured by year-on-year changes in the all-India Consumer Price-based Inflation (CPI), softened to 4.7 per cent in May 2024 – the lowest in the last 12 months – from 4.8 per cent in April. “Headline inflation is gradually easing, driven by sustained softening of its core component, although the path of disinflation is interrupted by volatile and elevated food prices,” the ‘State of the Economy’ article published in the RBI’s June bulletin said. Food inflation (y-o-y) remained unchanged at 7.9 per cent in May. In terms of sub-groups, inflation edged up in respect of cereals, egg, fruits and pulses while meat and fish, milk, sugar, spices, nonalcoholic beverages and prepared meals witnessed a moderation in inflation. Vegetable prices recorded a double digit y-o-y inflation for the seventh consecutive month. Edible oils remained in deflation, albeit at a slower rate than a month ago. The article is prepared by the RBI Deputy Governor Michael Patra and other central bank officials. The RBI said the views published in the article are of the authors and not of the institution. The prospects for agriculture are brightening with the early landfall of the southwest monsoon, the article said. Incidentally, the India Meteorological Department (IMD) on Wednesday predicted that the average June rainfall for the country as a whole is most likely to be below normal, less than 92 per cent of the Long Period Average (LPA). The county has received 20 per cent below normal rainfall since the start of the monsoon period on June 1, the IMD has said. “The prospects for agriculture are brightening with the early landfall of the southwest monsoon,” the ‘State of the Economy’ article published in the RBI’s June bulletin said. The article said as per the RBI’s Monetary Policy Committee’s (MPC), which met during June 5-7, assessment, the expectation of good agriculture production should augur well for spurring rural demand and, in turn, support private consumption. The MPC also expected investment activity to be bolstered by strong balance sheets of banks and corporates, the policy emphasis on infrastructure spending, and rising business optimism, it said. The article said that headline inflation is gradually easing, driven by sustained softening of its core component, although the path of disinflation is interrupted by volatile and elevated food prices. On growth, the article said that the high-frequency indicators suggest the real GDP growth in Q1 of FY2024-25 is broadly maintaining the pace it achieved in the preceding quarter. The Indian economy expanded at 7.8 per cent in Q4 FY2023-24 as compared with 8.6 per cent in Q3 FY2024. It said that the domestic demand conditions during April-June 2024 quarter. E-way bills grew by 17 per cent (y-o-y) in May 2024, with sequential growth in both inter- and intra-state E-way. Toll collections increased by 8.7 per cent (y-o-y) in May 2024. Automobile sales recorded a growth of 9.3 per cent (y-o-y) in May 2024, led by passenger vehicles segment as well as two-and-three wheelers, even as growth for entry level vehicles continued to remain weak. Domestic tractor sales increased to a seven-month high in May 2024 as the timely arrival of the southwest monsoon and the onset of the kharif season sowing buoyed farmer sentiments. Vehicle registrations moderated in May 2024, mainly in the non-transport vehicles segment as extreme heat reduced walk-ins and registrations, it said. For FY25, the RBI has projected real GDP to rise by 7.2 per cent, over and above the growth rate of 8.2 per cent achieved in the year gone by.
