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Informist, Monday, Jul 22, 2024

--Headline inflation largely under control

--Clarity on food prices can improve govt steps' efficacy
--Additional trade restrictions can push food prices higher

--Inflation rate of some specific food items is elevated

--See headwinds in terms of high input prices

--Short-term inflation outlook for India benign

--Shocks in commodity prices may impact India inflation

--Fall in commodity prices positive for inflation outlook

--Clarity on food prices can improve govt steps' efficacy 

--Geopolitical tension 2024 may raise commodity prices 

--Econ adviser: Inflation should be below 5% by end of FY25 

--Econ adviser: Food inflation may flare up but unlikely to prolong

NEW DELHI – The short-term inflation outlook for India is benign, but the government needs to do more from the perspective of long-term price stability, the Economic Survey for 2023-24 (Apr-Mar), tabled in the Parliament today, said.

Headline inflation has largely been under control even though prices of some specific food items remain high, the survey said. Headline CPI inflation rose to a four-month high of 5.08% in June because of sharply higher vegetable prices, particularly onion, tomato and potato. 

CPI inflation has now remained above the Reserve Bank of India's medium-term target of 4.0% for 57 consecutive months.

Chief Economic Adviser to the government, V. Anantha Nageswaran, at a press conference said inflation should fall below 5% by the end of the financial year. "Food inflation may flare up but is unlikely to prolong," he said. 

The central bank has projected CPI inflation to moderate to 3.8% in Jul-Sep, before rising again to 4.6% in Oct-Dec and 4.5% in Jan-Mar.

Administrative actions such as open market operations, subsidised provision of essential food items, and trade policy measures, helped mitigate food inflation to a great extent last year, the survey said. "The expectation of a normal monsoon and moderating global prices of key imported items give credence to the benign and range-bound inflation projections for India made by the Reserve Bank of India," the survey said.

The current downward movement in the prices of commodities imported by India is also positive for the domestic inflation outlook, the survey said. However, any shock in global commodity prices, particularly those imported by India, because of an escalation in geopolitical tension, can lead to a rise in input costs which could push inflation higher, the survey said. Additional trade restrictions globally also risk pushing food prices higher.

"The medium to long-term inflation outlook will be shaped by the strengthening of price monitoring mechanisms and market intelligence as well as focussed efforts to increase the domestic production of essential food items like pulses and edible oils for which India has a great degree of import dependence," the survey said.  End

Reported by Shubham Rana

Edited by Vidhi Verma

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