Food prices rose 1.14% over April levels. Image used for representative purpose only. 
| Photo Credit: K. Murali Kumar

Inflation in India’s wholesale prices accelerated to a 15-month high of 2.61% in May, more than double April’s pace, with food inflation surging to a 10-month peak of 7.4% driven by steeper prices for vegetables, fruits, pulses and cereals, and a resurgence of price rise in manufactured products after 14 months of decline.

Economists said the rise in wholesale inflation in May signals there is room for a further surge in consumer prices despite retail inflation easing to a 12-month low of 4.75% last month, especially as food and industrial input prices are spiking globally. May was the seventh month in a row that the WPI rose on a year-on-year basis after seven consecutive months of decline, and it is expected to rise over 3% this month.

On a month-on-month basis, the Wholesale Price Index (WPI) was up 0.2% in May, easing from a ten-month high of 0.8% a month earlier, with food prices rising 1.14% over April levels and manufactured products’ prices up 0.64%.

The heatwaves in May helped fire up the inflation rate for vegetables to the highest level in nine months at 32.4%, and a six-month high of 5.8% for fruits. Price rise in cereals sped to 9%, while that for pulses reversed direction to hit a six-month high of 22%.

Within vegetables, tomato prices were up 64.5% in May from 40.6% in April, while inflation in onion and potato dropped slightly to a tad over 58% and 64%, respectively. Bank of Baroda chief economist Madan Sabnavis said these spikes in vegetable prices were partly due to supply shortfalls and the heat wave aggravated the challenge. “This is a major concern as it will keep up the pressure on the inflation till the next crop comes,” he told The Hindu.

India Ratings flagged similar concerns about pulses prices remaining elevated in double-digits as the new crop would be harvested only in October-November. “Elevated food inflation at the wholesale level is worrisome as this would keep retail food prices firm even going forward. Retail food inflation has been above 8% for the past seven months,” said the firm’s senior director and principal economist Sunil Kumar and senior analyst Paras Jasrai in a note.

India Ratings expects retail food inflation to remain over 8%, with wholesale prices expect to rise further to 3.5%, in June. CareEdge Ratings’ chief economist Rajani Sinha also pointed out that industrial metal prices have risen 9.3% since March-end and food prices are increasing globally.

“Positive rate of inflation in May is primarily due to increase in prices of food articles, manufacture of food products, crude petroleum & natural gas, mineral oils, other manufacturing, etc,” the Commerce and Industry Ministry said.

With prices rising 17.14% in May, pulses have now completed a year of over 10% inflation. File
| Photo Credit: The Hindu

India’s consumer price inflation eased a tad from 4.83% in April to a one-year low of 4.75% in May, but food price rise remained unchanged at 8.7%, with urban households facing a sharper 8.83% spike in food inflation. Retail inflation stood at 4.31% in May 2023, with food prices rising less than 3%.

May was the fourth successive month with food inflation of over 8.5%, though it cooled fractionally for rural consumers from 8.75% in April to 8.62%. On a month-on-month basis, the Consumer Price Index (CPI) was up 0.5% in May, while the food price index had risen 0.73% from April’s levels. The sequential rise in food prices was 0.7% for rural consumers and 0.9% for their urban counterparts.

Also Read | Fleeting relief: On slide in retail inflation 

The gap between urban and rural consumers’ inflation trends was sharp for the third consecutive month, with rural households seeing a 5.3% rise in prices in May. For urban consumers, the retail inflation pace was 4.15%, just fractionally higher than 4.14% in March and 4.11% in April.

While retail inflation has now been below 6% since September 2023, it is still far from the central bank’s 4% target. The Reserve Bank of India (RBI) expects retail inflation to average 4.5% this year and has projected an average of 4.9% for the April to June quarter. With April and May inflation coming in slightly below that, it is likely that price rise may resurge to over 5% this month.

Vegetable prices

Barring spices, where the inflation rate cooled to 4.3%, the lowest level in at least two years, price pressures persisted for most food items. Vegetable prices rose 27.3% in May, while the inflation rate accelerated for cereals (8.7%), eggs (7.6%), fruits (6.7%) as well as pulses. With prices rising 17.14% in May, pulses have now completed a year of over 10% inflation.

Meat and fish prices were up 7.3% in May, easing a tad from 8.2% in April. Edible oil prices were down 6.7% from last year compared with a 9.4% dip in April, making it the mildest decline in prices in at least 14 months.

Terming the rising inflation in key food items such as cereals and pulses, and the rigidity in vegetable prices as worrying, Crisil principal economist Dipti Deshpande said the progress of the southwest monsoon would influence the food inflation trajectory over the next few months and there could be softening this month.

Also Read : Extreme weather may pose risk to inflation, says RBI Bulletin

“Non-food inflation continues to offer respite, printing at a record low of 2.3%. Much of this was due to core sliding to 3%, also a record,” she noted.

“A favourable base effect is expected to persist till July 2024, helping absorb potential upward risks to price pressures to a certain extent. If food inflation moderates, we expect the RBI to cut the policy interest rate by a shallow 50 basis points in two tranches in the second half of the fiscal year,” said CareEdge Ratings’ chief economist Rajani Sinha. One basis point equals 0.01 per cent.

April marks the sixth successive month that the Wholesale Price Index has risen on a year-on-year basis. Representational file image.
| Photo Credit: SUSHIL KUMAR VERMA

Inflation in India’s wholesale prices rose to a 12-month high of 1.26% in April, from 0.53% in March, owing to an uptick in food inflation and a 1.4% year-on-year rise in fuel and power prices after several months of deflation.

The Wholesale Food Index rose 5.5%, compared with 4.65% in March, while the decline in manufactured products’ prices eased to 0.4% in April from 0.8% in the previous month. Inflation in primary articles also moved up from 4.5% in March to 5% last month, indicating a broad-based reversal of wholesale price trends.

Also read | Food inflation scaled 4-month peak of 8.7% in April

April marks the sixth successive month that the Wholesale Price Index (WPI) has risen on a year-on-year basis, after seven months of deflation. On a month-on-month basis, the WPI was up 0.8% with primary articles and food prices rising nearly 2% in April, while manufactured products were up 0.5%.

“Positive rate of inflation in April, 2024 is primarily due to increase in prices of food articles, electricity, crude petroleum & natural gas, manufacture of food products, other manufacturing, etc.”, the Commerce and Industry Ministry said.

Potatoes, onions report sharp inflation

Potatoes and onions reported a sharp surge in inflation, hitting 72% and 59.8%, respectively, from 53% and 57% in March. Paddy inflation also gained momentum, rising over 12%, while price rise in eggs, meat and fish stood at 0.9% compared with a 1.86% decline in prices March. At the retail level, eggs inflation was 7.1% while meat and fish prices had raced past 8% in April.

The rise in wheat and milk prices, however, eased a little to 5.7% and 4.3%, respectively, while fruit prices were down 1.8% from last April.

Food inflation surged to a four-month high of 8.7% in April from 8.52% in March. Representational file image.
| Photo Credit: Reuters

Consumers faced a further acceleration in steep food prices in April, even as India’s overall retail inflation remained virtually unchanged at 4.83% last month, compared with 4.85% in March.

Food inflation surged to a four-month high of 8.7% in April from 8.52% in March, with rural consumers witnessing a sharper uptick of 8.75% in food prices. The gap between urban and rural consumers’ inflation experience remained sharp for the second successive month with rural households seeing a 5.43% rise in prices, while the overall inflation rate faced by urban consumers remained virtually unchanged from 4.14% in March to 4.11% in April.

On a month-on-month basis, price levels rose about 0.5%, with urban consumers facing a sharper uptick in overall prices as well as food items. Food prices rose 1.03% from March levels in urban India, while the rise was more subdued for their rural counterparts at 0.59%. The Consumer Price Index (CPI) was up 0.6% over March for urban households, while it was 0.37% higher for rural India.

The Reserve Bank of India (RBI) expects retail inflation to ease to an average of 4.5% this year from the 5.4% clocked in 2023-24, with the ongoing April to June quarter expected to see an average inflation of 4.9%. With April reporting a marginally lower inflation rate than the RBI’s projected average for the quarter, there could see some hardening in prices over this month and June.

The government has tasked the Reserve Bank to ensure inflation remains at 4%, with a margin of 2% on either side.

A similar easing was recorded in pulses, whose prices rose 17.7% in March, 2024, from 18.5% in February.
| Photo Credit: Sushil Kumar Verma

India’s retail inflation moderated to a ten-month low of 4.85% in March from 5.1% in February, but food inflation remained sticky at 8.52%, little changed from the 8.66% recorded in the previous month as price rise accelerated in cereals and meat, while vegetables, pulses, spices and eggs remained in double-digit inflation.

While inflation for urban consumers cooled significantly from 4.8% in February to 4.14% in March, rural consumers had it harder as they experienced a slightly higher inflation of 5.45% in March compared with 5.34% in the previous month.

This trend was visible in the extent of food price rise as well, as it accelerated from 8.3% in February to 8.6% in March for rural India, while the food inflation for urban consumers dropped from 9.2% in February to 8.35% last month.

On a month-on-month basis, there was no change in the Consumer Price Index but the food price index inched up about 0.2% and economists reckoned that the ongoing heat wave could spike food inflation in coming months. Even as crude oil prices are firming up and an inflation spike in the US may delay hopes of interest rate cuts from the Federal Reserve, sticky food inflation at home could further dampen prospects of rate cuts from India’s central bank.

While March’s inflation rate is still aloof from the bank’s stated 4% target, average retail price rise in the last quarter of 2023-24 has been 5.01%, in line with the 5% average projected by the Reserve Bank of India (RBI).

The RBI, which last week called Inflation the elephant in the room that needs to return to the forest for good, expects retail inflation to ease to an average 4.5% this year from the 5.4% clocked in 2023-24. The ongoing April to June quarter is, however, expected to see an average inflation of 4.9%, as per the RBI.

Within the food basket, vegetables’ inflation cooled marginally from the seven-month high of 30.25% in February to 28.3% last month. A similar easing was recorded in pulses, whose prices rose 17.7% in March from 18.5% in February, eggs (up 10.33% from 10.7%), sugar (up 7.25% compared with 7.5% in February.

Also read | What causes inflation in India: Demand or supply issues? | Data 

However, the price rise in cereals spiked to 8.4% in March from 7.6% in the previous month, and rose to 6.4% for meat and fish, from 5.2% a month earlier. Spices inflation remained over double digits at 11.4%, moderating from 13.5% in February.

Food prices continue to be under pressure with cereals, vegetables, spices and pulses seeing high inflation and the present heat wave poses an upside risk,” said Bank of Baroda economist Madan Sabnavis, who added that recent price hikes by fast moving consumer goods firms is another monitorable.

Although inflation in household goods and services, as well as health and education, eased slightly from February levels, personal care and effects prices surged at a faster pace of over 6% in March from 5.2% the previous month.

“While core inflation continues to moderate, we remain wary of the heatwaves going ahead which could keep food inflation elevated and volatile in the summer months,” said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank. Ms. Bhardwaj expects any possible interest rate cuts only in the latter half of this fiscal year, depending on monsoons’ performance, the trajectory of crude oil prices and the timing of the US Fed’s rate easing cycle.

Rating agency ICRA expects food and beverages inflation, which was 7.8% in March, to persist over 7% in April as well. “An intensification of the impending heatwave may worsen the seasonal uptick in prices of perishables, heightening the criticality of a favourable monsoon this year to keep food inflation in check and anchor inflationary expectations,” its chief economist Aditi Nayar stressed.

Photo used for representation purpose only.
| Photo Credit: Reuters

India’s economy is expected to remain robust over the next two years even though headline growth in the country’s Gross Domestic Product (GDP) is forecast to slow from 7.6% in 2023-24 to 7% this year before improving to 7.2% in 2025-26, the Asian Development Bank (ADB) said.

In its Asia Development Outlook report released on April 11, the Bank said it expects retail inflation to ease to 4.6% this year and 4.5% in 2025-26. India’s ‘persistent’ food inflation is expected to drop to 5.7% as farm output returns to trend this year.

A projected normal monsoon this year will also help revive rural consumption. Rural consumption was muted last year due to erratic rainfall affecting the farm sector, with greater demand for work under the Mahatma Gandhi National Rural Employment Guarantee Act signalling the resultant stress.

“In India, growth is forecast to remain strong as rising consumption complements continued investment growth,” said Abdul Abiad, director of ADB’s macroeconomics research division. As India accounts for 80% of South Asia’s GDP, it is still the fastest-growing sub-region with improving domestic demand as prices moderate in most economies, he noted. South Asia is expected to grow 6.3% this year and 6.6% in 2025.

Higher incomes will spur consumer demand and confidence levels in urban consumers has improved, so demand is expected to rise from those areas with falling inflation and a gradual improvement in cities’ labour markets, the ADB reckoned. However, a rise in imports to meet domestic demand could widen the Current Account Deficit moderately to 1.7% of GDP this year and next year, it said.

India’s growth, the report said, will be driven by public and private sector investment demand and by gradual improvement in consumer demand as the rural economy improves. While exports are likely to be relatively muted this year as growth in major advanced economies slows down, they will improve in 2025-26.

“Foreign direct investment inflow will likely remain muted in the near term due to tight global financial conditions but will pick up in 2025-26 with higher industry and infrastructure investment,” the report averred.

India’s growth, the report said, will be driven by public and private sector investment demand and by gradual improvement in consumer demand as the rural economy improves. While exports are likely to be relatively muted this year as growth in major advanced economies slows down, they will improve in 2025-26.

Stressing that India’s economic outlook depends on price and financial market stability that are crucial for consumer and business confidence, the ADB said its projections face a downside risk from global shocks such as a spike in crude oil and energy prices leading to higher global inflation and tighter financial conditions.

“On the domestic side, there is a risk of underperformance in agriculture due to weather shocks that can affect demand and inflation,” it noted.

Among upside risks to its forecast, the Bank said, was faster-than-expected FDI inflow, particularly into manufacturing, which would improve output as well as productivity. “Better-than-expected global growth could boost exports and thus growth,” the ADB added.

Coming after a 11-year hiatus, the latest Household Consumption Expenditure Survey findings based on surveys conducted between August 2022 and July 2023, shall feed into a possible review of the Consumer Price Index. 
| Photo Credit: The Hindu

India’s headline inflation is expected to trend down creating more room for monetary and fiscal policy to focus on spurring growth rather than fret over inflation, if the latest Household Consumption Expenditure Survey (HCES) that shows a lower proportion of food spends for both rural and urban consumers, is used to rejig the Consumer Price Index (CPI).

The CPI, which is currently based on the 2011-12 consumption spending survey, assigns a weightage of almost 54.2% for rural consumers’ food and beverages’ expenditure and 36.3% for urban consumers, with the combined weightage for such expenses by all households at nearly 46%.

As per the HCES findings for 2022-23, rural spending on food and beverages has dropped to 46.4% from 52.9% in 2011-12, while urban peers spent 39.2% of their overall monthly outgoes on food compared to 42.6% incurred 11 years earlier.

“I think this will have serious implications. There will have to be a complete recast of the CPI that the National Statistical Office [NSO] produces. What is driving inflation today is food, while core inflation is down,” remarked NITI Aayog CEO B.V.R. Subrahmanyam.

“That’s what the Reserve Bank of India [RBI] also keeps saying… that food inflation is spiking, sometimes in onions, sometimes in vegetables, sometimes in pulses. Suddenly, if their share shrinks, your inflation will also probably go down and my suspicion is our inflation is over-reported,” he noted.

In January, core inflation, which excludes volatile energy and food prices, is estimated to have hit a record low of 3.7% in the current CPI data series which uses 2012 as a base year. However, food inflation stood at 8.3%, while food and beverages together clocked a 7.6% inflation.

Mr. Subrahmanyam stressed that rebalancing the CPI, with a lower share of food and cereals, will possibly lead to a reduction in retail inflation which will affect the RBI, which sets interest rates based on retail inflation trends. Economists broadly agreed with Mr. Subrahmanyam’s prognosis.

“Lower weights for food will tend to have a bias on core inflation and reveal lower headline inflation for sure. These weights need to be carefully assessed and ratified over a period of time. Hence choice of the base year is important,” Bank of Baroda chief economist Madan Sabnavis told The Hindu, adding that lower retail inflation would give the central bank room to focus on growth.

GDP math effects 

Coming after a 11-year hiatus, the latest HCES findings based on surveys conducted between August 2022 and July 2023, shall feed into a possible review of the CPI. However, the government is likely to wait for the results of a fresh HCES that began last August and will be completed this July, before pursuing the CPI reset. An official said that the ongoing survey would confirm whether the 2022-23 Survey’s findings are robust and realistic.

The NITI Aayog CEO said this would happen in due course and could also affect the calculation of the economy’s output in GDP (Gross Domestic Product) terms, because the deflators would change. “Suppose GDP was 330, and you deflated it by 10%, it would be 300. But if you deflate it by 8%, the GDP would be higher. I think all these things will happen,” he said.

An economist who didn’t want to be identified said one will have to wait for the complete findings of the latest HCES to ascertain the extent of changes in consumption patterns and the impact on inflation rates will depend on when the government opts to change the CPI base and weightages.

A policy brief argued for a rational trade policy to contain food inflation which takes into account both consumers and producers.
| Photo Credit: TRAVELLINGLIGHT

A policy brief issued by the Indian Council for Research on International Economic Relations said that the recent steps taken by the government to curb inflation, such as wheat and rice export bans and increasing export duties, were “knee-jerk approaches rather than a well-thought-out strategy”. It argued for a rational trade policy to contain food inflation which takes into account both consumers and producers.

In August 2023, retail inflation accelerated to 6.83%, which is higher than the ceiling of 6%. As food and beverages carry a 57% weightage in India’s retail inflation calculation, and food inflation was 9.94%, rapid acceleration in that segment had a severe impact on retail inflation (Chart 1).

Chart 1 | The chart shows the trend of retail inflation (dark blue) and food inflation (light blue) over time.

Chart appears incomplete? Click to remove AMP mode.

To date, the Indian government has implemented a series of actions aimed at controlling food inflation such as prohibiting the export of wheat in May 2022 and halting the export of broken rice in September 2022. Additionally, in June 2023, the government imposed stocking limits on wheat traders and millers. In July 2023, an export ban was placed on non-basmati white rice, followed by a 20% export duty on parboiled rice. In August 2023, a Minimum Export Price of $1,200 per tonne was set for basmati rice, along with a 40% export duty on onions.

Chart 2 | The chart shows the chronology of trade and domestic stock policy measures to tame the inflation of rice and wheat. 

Due to heatwaves, the production of wheat has suffered in the last two years. Wheat procurement by the government has also been low in the last two cycles. Wheat inflation was 9.22% in August. All this prompted the government to ban wheat exports in May 2022, argues the brief. “But this sudden ban on wheat exports, instead of bringing wheat inflation down, led to greater uncertainty in the market and wheat inflation surged to 15.7 per cent in August 2022, when GOI also banned exports of wheat flour (atta) products,” says the policy brief. Just before the harvest season, wheat inflation accelerated to 25.4% in February 2023. Following this, the government off-loaded wheat under the Open Market Sales Scheme at much cheaper prices and announced wheat stocking limits, according to the policy brief. While these measures did bring down inflation, the report argues that the implications of such measures on farmers who bore the brunt have to be taken into account.

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Chart 3 | The chart shows trends in cereal exports in India. 

Data from the report shows that non-basmati exports increased from 1.38 MMT in FY20 to 6.40 MMT in FY23, by 363%. The report argues that in the fiscal year 2023, the per-tonne export value for non-basmati rice stood at $344, falling below India’s Minimum Support Price (MSP) for rice. This indicates that millers may be sourcing rice directly from farmers or that there could be an increase in rice supply due to potential distribution leakages from the expanded PMGKAY free rice programme. 

Chart 4 | The chart shows the offtake of rice and wheat under the National Food Security Act and PMGKY from the central pool. 

Chart 3 and Chart 4 underscore the growth in rice and wheat offtake within the last three years, as well as the significant rise in grain exports from India over the same time period.

In July 2023, when rice inflation was 13%, the government banned the export of non-basmati rice. Yet, inflation remained at 12.5%. Rather than imposing export duty and gradually increasing its impact, the government called for a ban which created panic among the African and Indian diaspora in the U.S., according to the report.

Source: A report called “Tackling food inflation: Is restricting exports and imposing stocking limits the optimal policy?” published by the Indian Council for Research on International Economic Relations

Also read | Data | Heat wave in Punjab may curtail India’s wheat exports

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A man cooks food at his home adjacent to railway track, as a train passes near the Daya Basti area in New Delhi on Tuesday, September 22, 2020.
| Photo Credit: MOORTHY RV

The report, ‘State of Food Security and Nutrition in the World’ (SOFI) 2023, published last month, shows that while the cost of a healthy diet has increased in recent years in India, it is still the lowest among the BRICS nations (including the newly added six countries) and India’s neighbours. However, the share of people who are able to afford such a healthy diet is still low: India features at the bottom of that list since income levels are stagnant or going down. SOFI is published by the Food and Agriculture Organization and jointly produced with fellow United Nations agencies.

The Data Point published on Wednesday concluded that the cost of meals in Mumbai rose by 65% in five years, while salaries/wages rose by just 28%-37%. Mumbai was chosen as an exemplar due to the availability of consistent data. Today’s analysis takes a broader view by comparing India’s numbers with other countries.

In the SOFI report, the cost of a healthy diet is arrived at by looking at the cheapest local food items that meet dietary guidelines. The cost and availability of such food items is averaged from national data. To check if the diet is affordable, its cost is compared to the average income in each country. A diet is considered too expensive if it costs more than 52% of a country’s average income. This percentage is based on data showing that people in low-income countries spend about 52% of their income on food. The percentage of people who cannot afford this diet is then calculated by using income distributions within a nation.

Chart 1 | The chart shows the cost of a healthy diet in terms of PPP dollars per person per day in 2021, the latest year with comparable data.

Charts appear incomplete? Click to remove AMP mode

For instance, in India, a healthy diet costs 3.066 PPP dollars per person per day, the lowest among the countries considered. PPP stands for ‘Purchasing Power Parity’. In simple terms, 1 PPP dollar in the United States should buy the same amount of goods and services as 1 PPP dollar in, say, India or Brazil. The cost of a healthy diet expressed as ‘X PPP dollars per person per day’ means that it would cost that much per person every day to maintain a healthy diet, accounting for differences in the cost of living between countries.

Chart 2 | The chart shows the share of the population that is unable to afford a healthy diet in 2021.

For instance, in India, 74% were not able to afford a healthy diet, the fourth highest share among the nations considered. Charts 1 and 2 show that the cost of a healthy diet in India, though increasing, is still lower than many comparable economies. However, given the poor income levels in India, a healthy diet is still unaffordable to many.

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Chart 3 | The chart shows the change in the cost of a healthy diet over the years across regions.

Between 2019 (before the COVID-19 pandemic) and 2021, the expense of maintaining a healthy diet increased by almost 9% in Asia — the highest across regions.

Chart 4 | The chart shows the change in the number of people who were unable to afford a healthy diet over the years across regions.

Between 2019 and 2021, Asia followed by Africa recorded the highest growth in the number of people who could not afford a healthy diet. The two continents together made up 92% of the worldwide increase. In Asia, South Asia had the highest number of people (1.4 billion) and the highest share (72%) who could not afford a healthy diet. This rate was nearly double the average for the region. In Africa, Eastern and Western Africa together had the most people (712 million) and the highest share (85%) who could not afford a healthy diet.

Source: World Bank blog titled, “Over 3.1 billion people could not afford a healthy diet in 2021 – an increase of 134 million since the start of COVID-19”, State of Food Security and Nutrition in the World

Also read: Policy changes to make healthy food cheaper are the need of the hour to tackle diabetes epidemic: Expert

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Grocery item put on display for sale at a market, in New Delhi. File
| Photo Credit: Sushil Kumar Verma

India’s inflation woes are not over yet but food price spikes may be “transitory”, the Finance Ministry said on August 22, attributing the latest spike in headline inflation to global uncertainties triggered by the termination of the Black Sea Grain Initiative that has upset wheat and edible oil supplies, as well as disruptions in domestic farm output.

The impact of the global disruptions was “clearly evident” in the sharp surge in the retail inflation pace in July to a 15-month high of 7.44%, the Ministry said, noting that the 11.5% food inflation rate was “perhaps the third highest” since the current Consumer Price Index (CPI) series began in 2014. Core inflation, which excludes energy and food costs, was at a 39-month low of 4.9%, it emphasised.

The global uncertainty and domestic disruptions may keep inflationary pressures elevated for the coming months, warranting greater vigilance from the government and the central bank, the review stressed, underlining the need to bring the focus back on maintaining macroeconomic stability.

“Cereals, pulses and vegetables exhibited double-digit growth… [but] only 48% of food items have inflation of above 6%, and this includes 14 food items with inflation in double digits. Items like tomato, green chilli, ginger and garlic witnessed inflation of more than 50%,” the Ministry said in its monthly economic review for July.

Holding these “abnormal” upticks in some items responsible for fuelling high food inflation last month, the review said this is expected to be transitory. “Tomato prices are likely to decline with the arrival of fresh stocks by the end of August or early September. Further enhanced imports of tur dal are expected to moderate pulses inflation,” it pointed out, arguing that these and other government efforts “can soon materialise moderation in food inflation in the coming months”.

Dry conditions

Apart from the termination of the Black Sea Grain Initiative which has created “disorderly conditions around the supply of wheat and sunflower oil”, the Ministry noted that continued dry conditions in Canada and the U.S. have caused wheat prices to rise. “Subdued production growth of oil palm in Malaysia and concern over the production outlook of soybeans and rape seed in the U.S. and Canada led to a spike in vegetable oils price,” it added.

“Disruption in domestic production also aggravated the inflationary pressures. Interruption in the supply chain of tomatoes due to white fly disease in Kolar district, Karnataka and the swift arrival of monsoon in northern India caused a surge in tomato prices. Tur dal price also inflated due to deficient production in the Kharif season [of] 2022-23.”

Domestic consumption and investment demand are expected to continue driving India’s growth, but further global monetary tightening could hurt stock markets in emerging economies, the Ministry cautioned.