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World Bank senior economist Dhruv Sharma on Tuesday projected India's retail inflation, which is measured by the Consumer Price Index (CPI), to be 5.1% for the next financial year.

“Our expectation is that by next year, inflation will decrease and fall under the RBI band of 2-6%. We expect it to be 5.1% in the next FY," the World Bank economist said.

The driving factor for retail inflation, which is a little higher than the RBI limits, is largely food, Sharma added.

Meanwhile, the World Bank has revised its growth forecast for India in the current fiscal year, increasing the projection from 6.5% to 6.9%.

Addressing a briefing in Delhi, Sharma said the uptick is largely because recent GDP data showed more robust domestic activity than expected.

He said India is better-positioned than its peers to weather external financial shocks this fiscal year, which ends in March.

For FY2024, the World Bank also changed its forecast, cutting the growth projection from 7% to 6.6%. 

'Rupee fared relatively well'

Speaking about the Indian currency, the senior World Bank economist said Rupee has fared relatively well in 2022 in comparison to other emerging market peers.

"The Rupee has depreciated just about 10 per cent over the course of this year. That might sound like a large number, but relative to many other emerging market peers, India hasn't fared that badly," Sharma said at a press briefing.

For the record, the Indian currency has come substantially off its all-time low. At present, it is trading around 82.0 versus the US Dollar as against a record low of 83 it breached in mid-October.

Tightening monetary policy by the US Federal Reserve and central banks in other advanced economies triggered the depreciation of Rupee.

An increase in policy rates in America and other advanced economies typically leads to a depreciation of the Rupee.

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