What did RBI Governor Shaktikanta Das say about Monsoon in the monetary policy meeting?

RBI Monetary Policy Meeting: RBI Governor Shaktikanta Das expressed optimism regarding the upcoming monsoon season, citing the India Meteorological Department's forecast of above-normal rainfall. This forecast is anticipated to invigorate kharif crop production and replenish reservoir levels, consequently stimulating rural consumption. Read what did the governor say about Monsoon in the monetary policy meeting? 

Inflation dynamics

While headline CPI inflation witnessed a softening during March-April, persistent pressures from food inflation counteracted the gains from core disinflation and deflation in fuel groups. Notably, inflation in pulses and vegetables remained entrenched in double digits, with vegetable prices seeing an uptick after a modest correction in the winter season. The deflation in fuel prices primarily stemmed from LPG price reductions in early March.

Challenges and monitoring

Concerns were raised about the potential stress on summer crops, particularly vegetables and fruits, due to exceptionally hot weather and low reservoir levels. Additionally, monitoring of rabi arrivals of pulses and vegetables was deemed essential. Global food prices and industrial metals prices registered upward trends, which, if sustained, could exacerbate input cost conditions for businesses.

Positive outlook for Kharif season

Despite challenges, the outlook for the kharif season appears promising, with wheat procurement surpassing last year's levels and buffer stocks of wheat and rice comfortably exceeding norms. These developments are expected to alleviate inflationary pressures, especially in cereals and pulses.

Inflation projections

Assuming a normal monsoon, CPI inflation for the fiscal year 2024-25 is projected at 4.5 percent, with quarterly projections of 4.9 percent for Q1, 3.8 percent for Q2, 4.6 percent for Q3, and 4.5 percent for Q4. The risks associated with these projections are considered evenly balanced.

IMD's monsoon forecast update

The India Meteorological Department (IMD) recently released an updated Long-Range Forecast for the 2024 Southwest Monsoon (SWM) seasonal rainfall (June to September). The forecast predicts above-normal rainfall at 106 percent of the long-period average (LPA), with a lower model error of +/- 4 percent compared to previous estimates in April 2024.