As monsoon progresses, food prices set to cool off in coming months, say experts

Inflation had eased to a 12-month low of 4.75 per cent in May after having come down to 4.83 per cent in April

New Delhi: The food prices are projected to cool off in the coming months and the inflation trajectory to soften and stabilise between 4 and 4.5 per cent, industry experts said.

India’s consumer price inflation (CPI) edged up to 5.08 per cent in June this year compared to the same period last year. According to industry experts, although June rains were deficient, it is not a major concern because July and August rains are what matter for Kharif.

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“We expect the progress on monsoons and pick up in sowing to improve agricultural output and cool off food inflation in the coming months,” said Dharmakirti Joshi, Chief Economist, Crisil. Non-food inflation eased for the 17th straight month, sliding to a record low of 2.3 per cent.

“Net-net, we expect a decline in food inflation in the coming months to drag down headline inflation to an average of 4.5 per cent. That said, no rate cuts are expected in the forthcoming policy as RBI pursues a target of 4 per cent durable inflation,” Joshi explained.

Inflation had eased to a 12-month low of 4.75 per cent in May after having come down to 4.83 per cent in April, which was an 11-month low. The June figures mark a break from the declining trend that had set in during recent months. According to Sanjeev Agrawal, President, PHD Chamber of Commerce and Industry (PHDCCI), CPI inflation for the month of June is majorly stoked by the food and beverages inflation rising from 7.9 per cent in May to 8.4 per cent in June.

“Going ahead, we expect the food prices to stabilise in the coming months and inflation trajectory also to soften and stabilise between 4 and 4.5 per cent,” Agrawal said. Aditi Nayar, Chief Economist at ICRA, said barring food and beverages, inflation across all the other sub-groups remained below the 4 per cent mark in June.

“With nearly 50 per cent of kharif sowing usually taking place in the month of July, adequate rainfall across regions will be critical over the next few weeks to accelerate the pace of sowing,” she noted.

ICRA estimates the headline CPI inflation to soften to 2.5-3 per cent in July entirely on account of the favourable base effect (+7.4 per cent in July 2023), which will partly absorb the impact of the sequential surge in prices of vegetables.