RBI MPC Policy: Governor sees inflation to be above 6% for first 3-quarters of FY23; know what analysts have to say on this?

While announcing a hike in key interest rates, the Reserve Bank of India (RBI) on Wednesday upped the inflation projection for the current fiscal to 6.7 per cent from a 5.7 per cent forecast in April. 

RBI Governor Shaktikanta Das said the upside risk to inflation persists and the recent spike in tomato prices would fuel food inflation. Also, high global crude oil prices would add to the upside pressure on inflation. 

The upward revision in inflation projection comes as domestic retail inflation has remained above RBI's comfort level of 6 per cent for four months in a row, mainly due to the Russia-Ukraine war which has impacted the prices of commodities across the globe. 

RBI has projected inflation to be at 7.5% in June quarter (Q1) and 7.4% per cent in September quarter (Q2) and it is expected to come down to 6.2 per cent in December quarter (Q3) and further reduce to 5.8 per cent in March quarter (Q4) of this fiscal. 

RBI has the mandate to keep inflation at 4 per cent with a bias of 2 per cent on either side. 

We have collated views from different experts on their take on inflation and reaction to RBI’s commentary: 

Expert: Amar Ambani, Head – Institutional Equities, YES Securities 

The inflation projection seemed to be a conservative one, as it assumes Oil to have peaked out and monsoon rainfall to be a normal one. So, the CPI projections are subject to revisions, depending on the magnitude of the supply-side risks.  

Expert: Sumit Chanda, Founder and CEO, JARVIS Invest. 

With inflation persisting above comfort levels due to the supply constraints, any relief from that perspective will be good for the markets. With the growth rate for FY23 retained at 7.2%, this would be the right time to buy the "India" story with a medium to long-term perspective. 

Expert: Dr. Mohit Batra, Founder & CEO of MarketsMojo 

While predicting inflation, RBI has assumed crude at $105 per barrel from its previous estimate of $100 per barrel. Therefore, there is a high probability that the inflation number may get revised upwards in the coming monetary policy. 

Expert: Sampath Reddy, Chief Investment officer, Bajaj Allianz Life 

On the inflation front, the forecast for the FY23 has been raised to 6.7% from 5.7% earlier, due to the elevated commodities prices, which we believe is realistic. On the growth front, GDP growth rate estimates retained at 7.2% for FY23, which is a healthy growth rate in the current backdrop. 

Expert: Umesh Revankar, Vice Chairman & MD, Shriram Transport Finance 

We believe the regulator may not hikes rates very aggressively hereon and will continue to monitor the evolving growth-inflation dynamics. While surplus system liquidity has come down, the RBI has said they will ensure adequate system liquidity for productive purposes.  

Expert: Sandeep Bagla, CEO, Trust Mutual Fund 

Don't expect inflationary expectations to come down and most likely the 10-year G-sec yield would trade between 8.25-8.50 in the next couple of quarters" 

Expert: Raghvendra Nath, Managing Director – Ladderup Wealth Management Private ltd. 

The RBI has revised the inflation for FY23 to 6.7%, so inflation will continue to hurt the consumer pockets and company bottom-line for the coming quarters. We may see the food inflation coming down if the expectation of a normal monsoon this season turns out to be true. CRR was expected to be raised, but it seems RBI has decided to maintain the liquidity with banks for now.