Budget 2024: A look at how India’s inflation panned out within a year before Sitharaman’s key announcements

Finance Minister Nirmala Sitharaman’s 2024 Budget is poised to address the economic landscape, with a focus on India’s inflation, which has been a key concern for policymakers.

Budget 2024 will be the first budget to be presented by Sitharaman during her second tenure as the finance minister in the newly formed government led by PM Narendra Modi.

At the forefront of budgetary considerations is the prevailing inflation rate. The inflation level has maintained a steady course, posing both challenges and opportunities for policymakers.

The Reserve Bank of India (RBI) at the beginning of FY24 was tasked with bringing down the high inflation levels within its tolerance band of 2-6 per cent.
In January 2023 (FY23), the retail inflation had surged dramatically to 6.52 per cent after dipping for two months. Apart from an unfavourable base, the burning prices of food (which accounts for almost 40 per cent of the Consumer Price Index) fueled the inflation level.


However, throughout the fiscal (FY24), the inflation rate witnessed moderation and reached within the RBI comfort zone, especially in H2. Since then, inflation has remained within the tolerance levels. The recent inflation print for the month of May stood at a 12-month low of 4.75 per cent on an annual basis.

Despite this progress, RBI Governor Shaktikanta Das emphasised the need to achieve a 4 per cent inflation target, indicating that this process should be gradual and sustainable.

During the June Monetary Policy Committee (MPC) meeting, Das likened inflation to an elephant returning to the woods very slowly, underscoring the central bank's cautious approach.

The RBI left the inflation aim for fiscal 2025 unchanged at 4.5 per cent. Inflation for fiscal 2024 stood at 5.4 per cent, at par with the central bank’s forecast.

The central bank now sees inflation for Q1, Q2, Q3 and Q4 of this fiscal year at 4.9 per cent, 3.8 per cent, 4.6 per cent and 4.5 per cent, respectively, with risks evenly balanced.

In the April policy, the monetary authority had pegged the inflation readings at 4.9 per cent, 3.8 per cent, 4.6 per cent and 4.5 per cent respectively, assuming a normal monsoon.

The food prices and continuous global crisis may disturb the robust economic numbers creating a difficult situation for the policymakers.

As the government gears up for Budget '24, the groundwork laid by existing policies forms a critical backdrop. Whether in the realms of taxation, investment incentives, or welfare programs, these policies have far-reaching implications for the economy. The principle of continuity and strategic realignment is likely to guide budgetary decisions, ensuring a seamless transition while addressing evolving economic demands.