Food Price Volatility: A Contingent Risk Amid Steady Inflation

The latest Reserve Bank Bulletin highlighted that food price volatility poses a contingent risk despite retail inflation remaining below 4% for two consecutive months. The global economic activity is slowing, with sluggish disinflation prompting caution among monetary policymakers. Domestically, robust private consumption and investment bolstered GDP growth despite agriculture underperformance.

The Reserve Bank's latest Bulletin underscores that food price volatility continues to be a significant risk, even though retail inflation has stayed below the 4% target for two consecutive months.

According to the September Bulletin, global economic activity is decelerating, and the pace of disinflation remains sluggish, leading to cautious stances among monetary policy authorities.

An article in the Bulletin, authored by a team led by RBI Deputy Governor Michael Debabrata Patra, notes that despite the domestic underperformance of agriculture, robust private consumption and gross fixed investment have driven GDP growth. The manufacturing sector remains strong, and resilient services are compensating for agricultural shortfalls.

(With inputs from agencies.)