Inflation trajectory may be benign going forward, says SBI report

India’s inflation trajectory going forward is expected to be benign with headline retail inflation potentially printing at less than 5 per cent in March 2023, State Bank of India said in a report on Thursday.

“CPI (consumer price index) numbers for March 23 could be even lower than 5 per cent, if July CPI numbers are closer to 6.5-6.6 per cent, a likely possibility,” SBI’s Group Chief Economic Adviser Soumya Kanti Ghosh wrote.

India’s CPI inflation has remained above the upper band of the RBI’s mandated 2-6 per cent range for six straight months up to June 2022. The June inflation print was at 7.01 per cent. The RBI’s medium-term target for CPI inflation is 4 per cent.

Upside risks to domestic inflation increased significantly after Russia’s invasion of Ukraine in late February led to a spurt in global commodity prices.

The Reserve Bank of India has raised the repo rate by 140 basis points to 5.40 per cent since May to tackle high inflation. The central bank has projected CPI inflation at 6.7 per cent in the current fiscal year and at 5 per cent in the first quarter of 2023-24 (April-March).