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Inflation to come down under 6 percent mark in July: CEA

30 Jul 2021 Evaluate

Chief Economic Advisor (CEA) K V Subramanian has said headline inflation will come down under the 6 percent mark in July itself but will stay at an elevated level of over 5 percent for some time. Such an outcome will get the price rise back into the upper-end of the target band given to RBI, he said, adding that consumer price inflation had breached the mark for three consecutive quarters last fiscal because of supply side issues like challenges in movement of goods.

He said ‘With reasonable probability, I expect this month the (inflation) print to come less than 6 percent.’ Right after data for May showing inflation at 6.4 percent had come out, Subramanian said he had predicted it will cool down in internal meetings and also during deliberations with the regulator. He added the sequential momentum in the number is range-bound despite the challenges posed by factors like commodity price rises.

He said in FY21, inflation was impacted because of the first wave of the pandemic which lasted longer, while the second wave saw distributed lockdowns and did not have a deep impact on inflation. The RBI has been holding rates to aid growth despite the surge in inflation. However, after the recent data prints, concerns have been expressed over the price rise. The next monetary policy meeting of the central bank will be held during August 4 - 6. On the growth front, he said the FY22 number should be within the ballpark of 10.5 percent as estimated by the finance ministry earlier. It can be noted that the RBI had revised down its estimate to 9.5 percent given the reverses of the second wave.

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