The Reserve Bank of India (RBI) has recently reported a stabilization in core inflation, indicating that price pressures within the economy are beginning to ease. The central bank detailed this development in its monthly bulletin on Tuesday, attributing the trend to a decrease in vegetable prices in August, which led to a reduction in retail inflation to 6.8%.
The RBI anticipates this downward trend will extend into September, with further reductions expected in retail inflation. The correction in prices has broadened beyond just the three main vegetables – tomato, potato and onion. The bank also expressed optimism for cereal prices, citing active supply side interventions as a supportive factor.
Despite these positive developments, headline inflation remains above the RBI’s comfort range of 2% to 6%. In August, core inflation fell below 5%. However, the central bank voiced concerns over rising crude oil prices, identifying them as a potential threat to global financial stability.
In terms of GDP growth, the RBI’s economic activity index now predicts a rate of 6.6% for the July-September quarter, marking a slowdown from the 7.8% recorded in the first quarter. This deceleration is partly attributed to a normalising base effect.
Despite weakening global prospects, the Indian economy appears to be strengthening due to domestic drivers. While global conditions may pose challenges, internal factors are providing momentum for India’s economic growth, according to the RBI’s bulletin.