India’s retail inflation is expected to trend down further in September as in the case of the upswing, the ebbing was driven by a reversal in the prices of vegetables. Hearteningly, the correction is not complete, RBI said in its report.
It is to be noted that the headline inflation moderated to 6.8% in August from 7.4% in July while the food inflation fell to 9.2% Y-o-Y in August from 10.6% in July.
The inflation in vegetables softened sharply, though it remained elevated. There are early indications of correction in a broad range of vegetable prices.
As per the data released by Emkay Global, average weekly retail prices for cereals (0.4%) and pulses (0.8%) rose, while prices for veg (-5.4%), milk (-0.2%) fell, while oils & fats were unchanged.
This was the fourth consecutive week where veg prices have declined, and is a sign that the recent price spike is abating, although the new harvest is at risk from a (so-far) deficient monsoon. On an annual basis, avg prices for cereals (4.6%), pulses (11.3%) and vegetables (11.1%) and milk (10.2%) were higher, while those for oils and fats (-16.9%) were lower, Madhavi Arora, Lead Economist, Emkay Global said.
Monsoon deficit improves marginally
Cumulative rainfall as of September 8 was 9% below the long-term average (LTA), while weekly rainfall was 16% higher than the LTA. The rainfall situation has improved somewhat as the North & West (0%) is now at the LTA, while Central (7% below LTA) has a lower deficit than earlier.
The deficit stayed the same for the South (-10%), while it worsened slightly in East and North East (-20%). With two weeks to go for the monsoon, it is likely that it will end the season in deficit, although healthy rains could help make up the deficit somewhat, Emkay Global said.
RBI in its report has also highlighted that the cumulative south-west monsoon (SWM) season rainfall, which was highly deficient in June 2023, recovered and exceeded the LPA by 5% by end-July.
The subsequent period, however, witnessed a large deficit in rainfall, resulting in the cumulative SWM rainfall (June 1 to September 12, 2023) being 10% below LPA.
Talking about the tomatoes, commodity that remained a key concern in recent past, RBI said within key vegetables, tomato prices continued their precipitous fall as fresh harvest arrivals strengthened and logistics improved during the monsoon break phase.
Onion prices started moving upward owing to seasonal shortage during July-August and storage losses in rabi crops following unseasonal rains during the pre-monsoon phase in Maharashtra and Karnataka, it added.
Stock of rice and wheat remained comfortable
RBI in its report highlighted that as on August 15, stock of rice and wheat with Food Corporation of India (FCI) and other public agencies remained comfortable at 355.7 lakh tonnes and 273.7 lakh tonnes.
The rice stock is 2.6 times more that the buffer norm while that of wheat is 1.0 times the norm.
It is to be highlighted that the government has undertaken a number of supply-side initiatives to ensure domestic availability.
On August 9, it announced that 50 lakh metric tonnes (LMT) of wheat and 25 LMT of rice would be offloaded in the open market in a phased manner under Open Market Sale Scheme through e-auctions.
As of August 30, the government has sold 12.8 lakh tonnes of wheat and 0.33 lakh tonnes of rice in the e-auctions conducted since the announcement on June 12, 2023
