The Reserve Bank of India (RBI) in its June Bulletin said that the retail inflation is gradually easing, but volatile and elevated food prices are interrupting the path of disinflation.
In an article on the “State of the Economy”, it said the global growth was resilient in the first quarter of 2024, and many central banks have pivoted towards a less restrictive monetary policy stance in response to the fall in inflation in their economies.
“Headline inflation is gradually easing, driven by sustained softening of its core component, although the path of disinflation is interrupted by volatile and elevated food prices,” the authors said.
“CPI headline inflation softened further during March-April, though persisting food inflation pressures offset the gains of disinflation in core and deflation in the fuel groups,” it said.
How was the food and fuel inflation?
As per the data shared by the RBI, despite some moderation, pulses and vegetables inflation remained firmly in double digits.
Vegetable prices are experiencing a summer uptick following a shallow winter season correction, it said.
The deflationary trend in fuel was driven primarily by the LPG price cuts in early March. Core inflation softened for the 11th consecutive month since June 2023.
Further, the services inflation moderated to a historic low and goods inflation remained contained.
Hot summer season to put stress on vegetable and fruits crops
As India is experiencing one of the hottest seasons this year, the RBI has said that the exceptionally hot summer season and low reservoir levels may put stress on the summer crop of vegetables and fruits.
It highlighted that the global food prices have started inching up, and the rabi arrivals of pulses and vegetables need to be carefully monitored.
Prices of industrial metals have registered double digit growth in the current calendar year so far, and these trends, if sustained, could accentuate the recent uptick in input cost conditions for firms.
On the other hand, the forecast of above normal monsoon bodes well for the kharif season. Wheat procurement has surpassed last year’s level, and the buffer stocks of wheat and rice are well above the norms.
These developments could bring respite to food inflation pressures, particularly in cereals and pulses. The outlook on crude oil prices remains uncertain due to geo-political tensions.
