Inflation in this fiscal is expected to be range-bound: RBI

Posted By: Religare
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Inflation in this fiscal is expected to be range-bound: RBI
Reserve Bank of India (RBI) has said that inflation is likely to be range-bound and stay around the current levels in this financial year as supply-side issues, along with recent price adjustments in fuel prices, will offset the recent gains.

In its annual Macroeconomic and Monetary Developments report, RBI said, "Headline inflation in 2013-14 is expected to remain range-bound around the current levels."

"While sluggish global growth may dampen global inflation risks, domestically energy price adjustments, supply -side bottlenecks, including that of food, and sustained wage pressures may offset the moderation of inflation resulting from growth moderation and past monetary policy actions," it added.

The Reserve Bank report added, however, that the recent fall in global commodity prices and subdued demand conditions may result in some further moderation in headline inflation in the coming months.

RBI also noted that moderation in inflation has not been in sync with the slowdown in growth because of structural bottlenecks along with revision in administered prices, especially in fuel.

Terming food inflation as a "major pressure point", RBI said that the easing of food inflation will depend on removing supply bottlenecks along with raising agriculture productivity.

On consumer price inflation, which still remains close to double-digits, the report said, "high CPI inflation remains a worry in the context of its increased openness and on account welfare implications."

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