RBI Governor Shaktikanta Das projects 7.2 per cent GDP growth for 2024-25, inflation eases to 5.1 per cent in June

Reserve Bank of India Governor Shaktikanta Das said that inflation will ease from July as the monsoon has improved and global food prices have shown signs of coming down in July.

“Global food prices have shown signs of moderation in the month of July after registering an increase since March 2024,” Das said.

The strengthening of the southwest monsoon and good progress in kharif sowing are expected to provide some relief to food inflation. According to RBI Governor Shaktikanta Das, the buffer stock of grains still remains above the norm.

“Assuming a normal monsoon and taking into account the inflation forecast of 4.9 per cent, CPI inflation for the current financial year (2024-25) is projected at 4.5 per cent in the first quarter, 4.4 per cent in the second quarter, 4.7 per cent in the third quarter and 4.3 per cent in the fourth quarter. CPI inflation for the next financial year (first quarter of 2025-26) is projected at 4.4 per cent,” Das said.

The inflation scenario reflects mixed signals, about which Das said, “Headline inflation eased to 5.1 per cent in June 2024 due to higher-than-expected food inflation. Fuel remained in deflation for the 10th consecutive month. Core inflation fell to historic lows in the months of May and June.”

RBI Governor Shaktikanta Das on Thursday set an economic growth outlook for FY2024-25 with real GDP growth of 7.2 per cent and headline inflation falling to 5.1 per cent in June.

“Real GDP growth for 2024-25 is projected at 7.2 per cent, with projections of 7.1 per cent in Q1, 7.2 per cent in Q2, 7.3 per cent in Q3 and 7.2 per cent in Q4. Real GDP growth for Q1 of 2025-26, this is something we are giving for the first time, is projected at 7.2 per cent. Risks are evenly balanced,” Das said.

“We have slightly lowered the growth forecast for the first quarter of the current fiscal year relative to the estimate given in the previous MPC in June. This is mainly due to updated information on some high frequency indicators that show lower than expected corporate profitability, general government expenditure and output of core industries,” he/she said.

This forecast is slightly lower than the previous estimates made by the Monetary Policy Committee (MPC) at its meeting in June, attributed to recent updates on high-frequency indicators such as corporate profitability, general government expenditure and output of key industries.

The inflation scenario reflects mixed signals, about which Das said, “Headline inflation eased to 5.1 per cent in June 2024 due to higher-than-expected food inflation. Fuel remained in deflation for the 10th consecutive month. Core inflation fell to historic lows in the months of May and June.”

Balancing strong growth projections with a nuanced understanding of inflation dynamics, Governor Das said, “Food inflation, which has a weight of about 46 per cent in the CPI basket, contributed over 75 per cent to headline inflation in May and June. Vegetable prices rose sharply and contributed nearly 35 per cent to inflation in June. Elevated inflationary pressures also persisted on other key food articles.”

Governor Das said that the softening of core inflation will continue on a broad-based basis and core services inflation will touch new lows in the current CPI series during May and June 2024.

“Food prices are likely to continue to remain elevated in July as well. However, a large favourable base effect could push core inflation downwards in July. The impact of milk price revision and mobile tariffs also need to be carefully monitored,” Das said.

The strengthening of the southwest monsoon and good progress in kharif sowing are expected to provide some relief to food inflation. According to RBI Governor Shaktikanta Das, the buffer stock of grains still remains higher than the norm.

Das expects some relief in food inflation due to an expected pick-up in the southwest monsoon and good progress in kharif sowing. Buffer stocks of grains remain above normative levels, bringing more stability to the food price environment. Global food prices, which have been moving upwards since March 2024, showed signs of easing in July.