India in lockdown
With commodities stuck en route, retail level prices across India have taken a slide. Inflation will likely go down to 4.8% from 6.6% in February. Image Credit: ANI

Mumbai: The Reserve Bank of India sees consumer price inflation moving toward the lower end of its target band this year as the coronavirus pandemic saps demand in the economy.

Projected inflation for the first quarter of the financial year that started April 1 was lowered to 4.8 per cent and is seen easing to 4.4 per cent in the three months through September from a range of 5-5.4 per cent for the six-month forecast. Price gains are expected to decelerate further to 2.7 per cent in the three months to December - near the lower end of the RBI’s 2-6 per cent target band.

Headline inflation eased to 6.6 per cent in February from 7.6 per cent in January, and probably cooled to 5.9 per cent in March, according to a Bloomberg survey. While numbers for March are due April 13, the data may be incomplete as field surveys were suspended during the second-half of the month owing to coronavirus-related precautions. A 21-day lockdown imposed since March 25 has brought all non-essential consumption to a standstill in the nation of 1.3 billion people.

“Forecasts are hazardous as they are subject to large revisions with every incoming data on the pandemic,” the RBI said in the report. “In the prevailing high uncertainty, aggregate demand may weaken further than currently anticipated.”

The central bank, in an emergency meeting last month, cut interest rates and injected $50 billion of liquidity to banks to expand credit to support the economy.