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Informist, Monday, Nov. 25, 2024

 

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--Fin min: Early Nov trends signal moderation in key food prices 
--CONTEXT: Comments by fin min in monthly econ review for Oct 
--Fin min:Bright agricultural output prospects make inflation outlook benign 
--Fin min: Kharif harvest expected to lower food inflation in coming months 
--Fin min: Bond prices may be repriced if inflation proves stubborn 
--Fin min: Favourable rains, adequate reservoir levels may boost rabi output 
--Fin min: Edible oils, tomato, onion, potato to influence inflation path 
--Fin min: Geopolitical factors may continue to hit inflation, supply chains

 

NEW DELHI - The outlook for inflation in India appears benign, thanks to the bright prospects for agricultural production, the finance ministry said in a report on Monday. In fact, early trends in November signal a moderation in prices of key food items, the ministry said. 

 

"Bright agricultural production prospects make the inflation outlook benign, despite existing price pressures in select food items," the ministry said in its Monthly Economic Review for October. "Early November trends signalled moderation in key food prices, though geopolitical factors may continue to impact domestic inflation and supply chains."

 

The inflation trajectory will largely be influenced by the price movements in edible oils, tomato, onion and potato, the ministry said. Early trend visible in vegetable prices in November so far signals significantly lower inflation in tomato and onion, it said.

 

India's headline CPI inflation rose to a 14-month high of 6.21% in October from 5.49% in September, mainly because of a sequential rise in food prices. October was the first month since August 2023 when headline inflation was above the upper bound of the RBI's medium-term target range of 2-6%. Food inflation rose to a 15-month high of 10.87% in October from 9.24% in September.

 

In the months ahead, food inflation is likely to come down due to an estimated "bumper kharif production", the ministry said. India's food grain output during kharif season is estimated at a record 164.7 million tonnes, 5.7% higher than 2023-24.

 

While kharif production is seen higher this year, favourable monsoon rains, adequate reservoir levels, and higher minimum support prices are likely to boost rabi sowing and production as well, the ministry said. 

 

The domestic inflation outlook may continue to be impacted by geopolitical factors and supply chain disruption, the ministry said. It termed geopolitical conditions "fragile" with recent developments in the ongoing conflict between Russia and Ukraine leading to "some concern in financial markets with safe-haven assets such as US Treasuries and gold finding a bid".

 

"Financial assets such as bond prices may be repriced if inflation proves stubborn, driven by global tensions and commodity prices," the ministry said.  End

 

Reported by Shubham Rana

Edited by Vandana Hingorani

 

 

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