India’s fight against inflation will be dogged and prolonged, given the long and variable lags with which monetary policy operates, and fraught with uncertainties, the Reserve Bank of India recently said in its ‘State of the Economy’ document. Looking ahead, India is poised to consolidate and accelerate the recovery over the rest of the year, it said.

While the persistence of headline consumer price index inflation above the tolerance band for three consecutive quarters (up to September) will trigger mandated accountability processes, monetary policy remains focussed on realigning inflation with the target, it said.

This trajectory will likely be gradual in view of the repeated shocks to which inflation has been subjected by both epidemiological and geopolitical causes, the document said.

The momentum of real gross domestic product growth is expected to shed the drag embedded in the National Statistical Office’s estimates for the first quarter of fiscal 2022-23 and move into positive territory in the remaining quarters, including on a seasonally-adjusted basis.

Although this may not be evident in year-on-year growth rates due to unfavourable base effects, quarter-on-quarter annualised rates will reflect the underlying recovery.

Headline inflation is set to ease from its September high, albeit stubbornly, on the back of easing momentum and favourable base effects, said the RBI document.

Easing in international price pressures embodied in commodity and supply chain pressures are also likely to contribute to the softening of costs and prices, it added.