The Reserve Bank of India (RBI) on Thursday said the lowering of inflation below its tolerance band of 6 per cent will ensure greater macroeconomic stability.

The next target for the RBI is to bring inflation down to its medium-term target of 4 per cent by 2024.

In its monthly January bulletin, under a team led by deputy-governor Michael Debabrata Patra, the central bank exuded optimism on the current account deficit (CAD).

It said CAD was on course to narrow down through the rest of this fiscal and the next. CAD soared to an all-time high of $36.4 billion, or 4.4 per cent of GDP, in the July-September quarter of 2022-23. The previous high was in October-December 2012 when CAD touched $32.6 billion.

After remaining above the RBI’s upper tolerance level of 6 per cent since January 2022, retail inflation declined in November to 5.88 per cent and further to 5.72 per cent in December.

“Recent data arrivals indicate that the first milestone of monetary policy is being passed — bringing inflation into the tolerance band. The objective during 2023 is to tether inflation therein so that it aligns with the target by 2024 — the second milestone,’’ the bulletin added.

In December, the RBI projected CPI inflation will come at 6.7 per cent in 2022-23, with the third quarter at 6.6 per cent and 5.9 per cent in the subsequent quarter. CPI inflation for the first quarter and second quarter of 2023-24 was projected at 5 per cent and 5.4 per cent, respectively.

According to the RBI, the softening of commodity prices and other costs amid strong revenues appears to have boosted corporate performance.

Waning input cost pressures, buoyant corporate sales and rising investments in fixed assets are heralding the beginning of an upturn in India’s capex cycle, which will contribute to speed up the growth momentum in the economy.

“The near-term growth outlook is supported by domestic drivers as reflected in trends in high-frequency indicators,” it noted.

On India’s digital economy, the bulletin said it grew 2.4 times faster than the economy between 2014 and 2019.

RBI report

■ Lower inflation will ensure greater macro-economic stability

■ CAD set to fall off from peaks

■ Softening of commodity prices have boosted results