Expressing concerns over price situation, the RBI today said that expensive food items like cereals and vegetables have continued to put pressure on the overall inflation rate.
“Still elevated food inflation, particularly in respect of cereals and vegetables, sustained upside pressures on overall inflation,” RBI Governor D. Subbarao said in the mid-quarter review of the monetary policy.
Given that food inflation remains high, the inflation outlook will be influenced by concerted efforts to break food inflation persistence, he said.
Pinning hopes on monsoon rains to cool the price situation, the RBI chief said: “last year’s robust rabi production and the monsoon performance so far augur well for growth prospects’’.
He noted that the onset of the south-west monsoon has been strong and on time.
Inflation outlook
The inflation outlook going forward will be determined by suppressed inflation being released through revisions in administered prices, including the minimum support price (MSP) as well as the recent depreciation of the rupee.
The policy review noted that retail inflation, as measured by the new combined (rural and urban) CPI, edged down from an average of 10.2 per cent last fiscal year to 9.3 per cent in May.
Headline Wholesale Price Index (WPI)-based inflation eased for three months in succession with the May reading at 4.7 per cent, down from an average of 7.4 per cent in 2012-13, it said.
All constituent categories, barring food, have moderated, the RBI review said.
In the fuel category, it said that coal and mineral oil prices declined, partly offsetting the upward revision in the administered prices of electricity.
Non-food manufactured products inflation too ebbed, driven by metal prices which fell for the eighth successive month in response to the softening of global prices, it said.
Easing commodity prices at the global level and weaker pricing power of corporates at the domestic level are having a softening influence, it added.