Food price volatility remains a contingent risk even as the overall retail inflation has remained below the target of 4 per cent for the second consecutive month in August, said the latest Bulletin of the Reserve Bank released on Friday.
The September Bulletin also said that global economic activity is slowing down while the pace of disinflation remains sluggish, provoking caution among monetary policy authorities.
“Consumer price index inflation came in below the Reserve Bank’s target for the second consecutive month in August, although in light of the recent experience, food price volatility remains a contingent risk,” said an article on ‘State of the Economy’ in the Bulletin.
The article authored by a team lead by RBI Deputy Governor Michael Debabrata Patra further said in India, domestic drivers – private consumption and gross fixed investment – were robust and net exports remained sequentially positive in their support to gross domestic product (GDP) growth in the April-June period of this financial year.
The underperformance of agriculture was compensated for by a buoyant manufacturing sector and resilient services.
Household consumption is poised to grow faster in the second half of the fiscal as headline inflation eases, with a revival of rural demand already taking hold.