"Overall, the second-round effects of food and fuel inflation on headline have become subdued, especially after the adoption of flexible inflation targeting (FIT) in India," says the apex bank.
Urban inflation rose to 6.1% in February from 6% in January while rural inflation declined to 6.72% in February from 6.85% in January.
Food inflation rate in the month of April soared to 8.38% compared with 1.96% in the same month of the previous financial year.
Inflation has exceeded RBI's comfort levels, forcing the central bank's hand to hike interest rates in line with its global peers.
Amid fears over retail inflation, everyone believes that the central bank will continue to wait and watch as a rate hike is out of question for now. The June inflation numbers will be key.
While the Reserve Bank of India kept policy rates and its accommodative stance unchanged, additional monetary measures have been brought in to fight the second wave of Covid-19.
Amid state-wide lockdowns imposed to tackle the surge in Coronavirus cases, and supply-chain disruptions, concerns of rising inflation remain.
The central bank unveils liquidity facility of ₹50,000 crore for access to emergency health services, and ₹10,000 crore for small finance banks’ on-lending, among a slew of measures to fight Covid-19.
The recent surge in Covid-19 infections, the central bank says, adds uncertainty to the outlook on domestic growth as restrictions could dampen demand improvement and delay the return of normalcy.
At its first monetary policy review for 2021, the central bank kept key rates unchanged, while announcing several measures to manage liquidity.
