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Food price inflation the key threat to policy outlook

India’s economy is showing signs of coming off the boil, and core inflation is moderating. However, a surge in food prices has pushed headline CPI inflation well beyond the upper limit of the RBI’s 2-6% tolerance range. The onset of a severe El Niño and potential second-round effects are key risks to our view that the RBI will begin loosening policy in early 2024.

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