Resurgent inflation worries: RBI directs to keep a close eye on the situation

- El Niño conditions, volatile global food prices, and overall inflationary risks raise concerns

- Monsoon progress in July and kharif sowing improved significantly, but impact of erratic spread of rains needs close attention.

MUMBAI: The Reserve Bank of India has also become worried as the retail inflation-price index in the country started to rise again in the July-August period due to the sharp rise in vegetable prices. The minutes of Reserve Bank of India's Monetary Policy Committee (MPC) have instructed to keep a close watch on the situation due to increased risk due to El-Nino and monsoon uncertainty.

Reserve Bank of India Governor Shaktikanta Das said at the recent MPC meeting that the sharp rise in vegetable prices is expected to ease rapidly with the arrival of new crop receipts, but there are risks to food and overall inflation due to El Nino conditions, volatile global food prices and the uncertain progress of the monsoon again. .

The MPC noted in its outlook that monsoon progress in July and kharif sowing showed a marked improvement, but the impact of erratic spread of rains needs to be closely monitored.

Retail inflation in India rose to a 15-month high of 7.44 percent in July. Food inflation accounts for half of the consumer price basket.

Jayant Verma, an external member of the MPC committee, expressed dismay in June, warning against declaring victory based on two months of inflation figures. "It is now clear that we will have several months of inflation figures above the tolerance band," Verma said.

In its August 8-10 meeting, the RBI raised its inflation forecast for the current fiscal year ending March 2024 to 5.4 percent from 5.1 percent previously, citing food price pressures. Inflation was seen at 6.2 percent in the July-September quarter, significantly higher than the previous forecast of 5.2 percent.

Reserve Bank of India Deputy Governor Michael Patra noted volatility in international inflation conditions and geopolitical events. He also said that India is facing overlapping domestic supply shocks leading to an increase in price sensitive food items in the CPI and rising inflation.