Retail Inflation : Report
July 2023 witnessed a notable increase in Retail Inflation, reaching 7.44%, creating Goldilocks scenario for India, making investors and savers uncertain about the economic situation.
- A Goldilocks Scenario describes an ideal state for an economy whereby the economy is not expanding or contracting by too much.
- A Goldilocks economy has steady economic growth, preventing a recession, but not so much growth that inflation rises by too much.
- The projected GDP (Gross Domestic Product) growth for 2023-24 is 6.5%, while the benchmark Sensex index stands currently at 65,000 points.
- Gold and bank deposit rates, on the other hand, are expected to remain stable in the coming months.
- The Reserve Bank of India (RBI) anticipates inflation to stay above 5% until the first quarter of 2024-25, potentially reaching 6.2% in the current quarter (July-Sept) 2023, exceeding the RBI’s comfort level of 4%.
- Food prices are expected to remain elevated for a few more months. July’s data reveals a surge in vegetable prices (37.3%), along with inflation in cereals, pulses (both 13%), spices (21.6%), and milk (8.3%).
- It is expected that government interventions and fresh crop arrivals will eventually ease this pressure.
- Due to the higher inflation projections, the possibility of a rate cut has been postponed to the next Fiscal Year (2024-25).
- The Monetary Policy Committee (MPC) is likely to maintain policy rates in the upcoming meeting, with the first rate cut potentially occurring in the following fiscal year.
- Despite inflation and high interest rates, India’s market has performed well.
- Supported by strong earnings prospects and stable macro conditions, India has outperformed other markets.
