Why is extreme weather posing a risk to inflation according to RBI Bulletin

Extreme weather conditions and escalated geopolitical tensions, as highlighted in the Reserve Bank of India's (RBI) April Bulletin released on Tuesday, could pose a risk to inflation. The bulletin notes that the retail inflation based on the Consumer Price Index (CPI) has declined to 4.9 per cent in March from an average of 5.1 per cent in the preceding two months.

The RBI, which considers CPI while formulating its bi-monthly monetary policy, has maintained the key interest rate at 6.5 per cent since February 2023, citing concerns about inflation.

The 'State of the Economy' article in the bulletin also mentioned that global growth momentum has been sustained in the first quarter of 2024, with a positive outlook for world trade. Treasury yields and mortgage rates are rising in major economies as expectations of interest rate cuts are diminishing.


"In India, conditions are shaping up for an extension of the trend upshift in real GDP growth, supported by strong investment demand and positive business and consumer sentiments," the bulletin stated.

The RBI clarified that the views expressed in the bulletin article are those of the authors and do not necessarily reflect the views of the Reserve Bank of India.

Furthermore, the Reserve Bank emphasized the need for the Indian economy to grow at a rate of 8-10 per cent per annum over the next decade to capitalize on the demographic dividend. The economy is already showing signs of growth, with the average real GDP growth surpassing 8 per cent during 2021-24.

According to a State Bank of India (SBI) report, India's GDP growth for the current financial year is expected to be close to 8 per cent.

(With inputs from PTI)