Retail and wholesale inflation as well as global commodity prices may have declined, but a likely shortfall in the balance of payments and a weakening rupee could add to MPC's woes
In its July bulletin, the Reserve Bank of India suggested that inflation may be peaking, and will align with the tolerance band of 2 to 6 percent by the fourth quarter of the current fiscal year. That’s the central bank’s baseline scenario. On a more optimistic note, the RBI doesn’t rule out the possibility that the “easing of inflation could be even sooner and faster”. The key is the direction of change in inflation—not its level—in these extraordinary times, it said.