RBI to revise economic growth, inflation projections in April, says Michael Patra

Patra said that prospects for the easing of food inflation remain bright with record production and buffer stocks

With the rising global crude oil prices in the wake of the Russia-Ukraine standoff presenting overwhelming upside risk to inflation, the RBI will revise its economic growth and inflation projections in the upcoming monetary policy meeting next month, a top RBI official said on Saturday.

"International crude prices present an overwhelming risk, though headroom to adjust excise duties can delay the passthrough to pump prices, Deputy Governor Michael Patra said in an industry event.

"India’s growth story remains as weak as it was at the time of the 2013 taper tantrum. The recent reverberations of war have, in fact, tilted the balance of risks downwards... geopolitical developments pose an upside risk to the Reserve Bank of India’s projection for inflation to ease to 4% by the October-December quarter of next fiscal year, and the April meeting provides an opportunity to thoroughly review the forecasts," Patra said.

Also Read | Food inflation on Ukraine crisis could force RBI to increase rates: Moody's

He, however, said that prospects for the easing of food inflation remain bright with record production and buffer stocks. Strong supply-side interventions and an increase in domestic production can check inflation-sensitive pulses and edible oil prices, though spillovers from the geopolitical situation cannot be ruled out.

While cost-push pressures on core inflation remain elevated, selling prices of businesses remain subdued due to low passthrough of input cost pressures, given a large amount of slack in the economy.

"While the fallout of the geopolitical situation is being assessed and will be factored into our projections...," he said.

Also Read | Brace for higher fuel prices, inflation

The had last month forecast the full-year inflation at 4.5% for fiscal 2022-23 from 5.3% now.

While India has a small linkage through trade and direct channels to the ongoing crisis, the potential spillover effects can’t be ruled out, Patra said.

Brent crude oil prices rose to a 14-year high of $140/bbl last week before settling down to $110/bbl, which may force policymakers to re-work their Budget projections for the financial year 2022-23. All macro-economic projections have been done keeping in view the global crude at $75 per barrel.

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