Food inflation likely to remain elevated, seen above 6% in H2

Upside risks to RBI forecast of 5.4% retail inflation for FY24

- PRIYANSH VERMA SANDIP DAS

ASHARP DECLINE in tomato prices may have caused the headline CPI (Consumer Price Index) inflation to plunge to 5.02% in September from 6.83% in August, but risks to food prices still persist, and experts see retail-food inflation staying above the 6%-mark in the second half of the current fiscal year.

An erratic monsoon and low reservoir levels are likely to have a moderately adverse impact on the yields of several crops, including paddy, pulses, oilseeds, and spices, which may keep inflationary pressures elevated in the near-term.

In the south-west monsoon period, which ended in September, rainfall has been particularly weak in east and north-east India, followed by south India. The total rainfall received from June to September was 94.4% of the benchmark-long-period average (LPA), or 'below normal'.

An above-6% food inflation in H2 poses an upside risk to the Reserve Bank of India's forecast of 5.4% for FY24, as prices of crude oil and other commodities, as witnessed in the September WPI data, have started to rise again which may put pressure on core CPI inflation.

According to the data released last week, the Consumer Food Price Index (CFPI) inflation fell to a threemonth low of 6.56% in September on the back of a crash in tomato prices, but the inflation rate of cereals, spices and pulses remained in double digits. The CFPI comprises 39% of the Consumer Price Index.