Food price volatility remains contingent risk: RBI - Greater Kashmir

Mumbai, Sep 20: Food price volatility remains a contingent risk even as the overall retail inflation has remained below the target of 4 per cent for the second consecutive month in August, said the latest Bulletin of the Reserve Bank released on Friday.

An article in the September Bulletin further said that household consumption is poised to grow faster in the second quarter as headline inflation eases, with a revival of rural demand already taking hold.

“Consumer price index (CPI) inflation came in below the Reserve Bank’s target for the second consecutive month in August, although in light of the recent experience, food price volatility remains a contingent risk,” said the article on the state of the economy.

It further said global economic activity is slowing down, while the pace of disinflation remains sluggish, provoking caution among monetary policy authorities.

In India, domestic drivers — private consumption and gross fixed investment — were robust and net exports remained sequentially positive in their support to gross domestic product (GDP) growth in the first quarter of this fiscal year.

Referring to bank deposits, the authors also noted that consistent with rising returns on term deposits, there has been higher accruals (16.6 per cent y-o-y growth in June 2024).

The share of savings deposits in total deposits has come down to 29.8 per cent in June 2024 from 31.8 per cent a year ago.

The share of term deposits offering interest rates over 7 per cent increased to 66.9 per cent in June 2024, from 33.5 per cent in March 2023 and 4.5 per cent in March 2022.

The article further said recent research on the energy outlook indicates that energy transition has accelerated in recent years, with the pace of clean technology deployment and capital investment surging to record levels.

“The era of fossil fuels’ dominance is coming to an end, with renewables expected to cross 50 per cent share of electricity generation globally by the end of this decade,” it said.

Cleaner power generation can drive bulk of the aggressive emissions cuts that are urgently needed, enabling more time to tackle ‘hard-to-abate’ areas like steelmaking and aviation, where cost competitive low-carbon solutions have yet to scale.

“A net-zero pathway hinges on renewables capacity tripling between now and the end of the decade,” it added.

On the energy supply side, it said for every US dollar that goes to fossil fuels, an average of USD 3 needs to be invested in low-carbon energy over the remainder of the decade – up from parity today.

A fully decarbonised global energy system by 2050 is projected to come with a USD 215 trillion price tag, the authors said.

The Reserve Bank said views expressed in the Bulletin article are of the authors and do not represent the views of the central bank.