Indian economy is gathering momentum in the second quarter, though inflation would continue to average above the central bank’s comfort zone of 6 per cent, said an article in the RBI’s monthly bulletin released on Thursday.

The consumer price index (CPI) based retail inflation shot up significantly to 7.44 per cent in July, from 4.87 per cent in the preceding month, mainly due to soaring prices of tomato, vegetables and other food items.
In his address to the nation on the Independence Day, Prime Minister Narendra Modi vowed to take more steps to contain price rise.

The uptick in inflation in its June reading mutated in July, with the unprecedented shock
to tomato prices spilling over to prices of other vegetables, said the article on ‘State of
the Economy’.
“While core inflation witnessed a moderation, headline inflation is expected to average
well above 6 per cent in the second quarter,” it said.
The article has been authored by a team lead by Reserve Bank Deputy Governor Michael
Debabrata Patra.
The central bank, however, said the views expressed in the article are of the authors and
do not represent the views of the .
The article further said that with industrial production and trade weakening, the global
recovery is slowing after a robust first quarter performance.
“In this stressed global environment, the Indian economy is gathering momentum in the
second quarter of 2023-24,” it said.
Domestic drivers such as private consumption and fixed investment are offsetting the
drag from the contraction in exports, it added.
RBI’s rate setting panel, Monetary Policy Committee (MPC), has retained its forecast of
economic growth at 6.5 per cent for 2023-24, noting that domestic economic activity is
holding up well, supported by domestic demand in spite of the drag from weak external
demand

It also revised upwards its projection of inflation taking into account the recent price
surges in the food category of the CPI.
The main revisions relate to the projections for the second and third quarters, with the
forecast for the fourth quarter unchanged.
According to the article, high frequency food price data for August so far (up to 14th)
show that prices of cereals and pulses continued to increase in August.
Edible oil prices continued to decline in July-August. Tomato prices, on an average,
registered a further increase in August so far, although more recent data indicate some
pullback in prices. Onion and potato prices also registered sequential upticks.