The RBI report, however, warned that the fight against inflation will be “dogged and prolonged, given the long and variable lags with which monetary policy operates, and fraught with uncertainties.” Image Credit: Bloomberg

Mumbai: India’s inflation will start falling from September highs due to easing food and fuel pressures, while contact-intensive sectors will lead a recovery in the economy, the Reserve Bank of India said in its monthly bulletin.

Festival-related spending is boosting consumption and triggering other components of overall demand, according to the State of the Economy report, part of RBI’s October bulletin released Monday. Deputy Governor Michael Patra is among the writers of the report.

Retail inflation jumped to a five-month high of 7.4 per cent in September from 7 per cent in August, marking the ninth straight month when prices rose above the RBI’s mandate of 2 per cent to 6 per cent, data released last week showed.

“Inflation is set to ease from its September high, albeit stubbornly, on the back of easing momentum and favorable base effects,” according to the RBI report. Food and beverages, which account for half of the consumer-inflation basket, will ease alongside other commodity prices, as supply chain pressures reduce.

The persistence of headline inflation above the tolerance band for three consecutive quarters will trigger “mandated accountability processes,” the central bank report said, adding that monetary policy remains focused on “realigning” inflation with the target.

As price gains stayed above the RBI’s target for three quarters in a row, under the inflation-targeting framework, the central bank will have to provide the federal government an explanation on why it missed the goal.