In vegetables, deflation was 3.50% in December, compared to 20.23% in November. File
| Photo Credit: The Hindu

Potato is one of the top five items which showed highest year-on-year inflation at All India level in December 2024 at 68.23%.
| Photo Credit: ANI

India’s retail inflation eased a bit to a four-month low of 5.22% in December 2024 from 5.5% in November 2024, with food inflation cooling marginally from 9.04% in November to 8.4% last month, the National Statistics Office said on Monday (January 13, 2025).

The top five items showing highest year-on-year Inflation at All India level in December 2024 are Peas (89.12%), Potato (68.23%), Garlic (58.17%), coconut oil (45.41%) and Cauliflower (39.42%), the NSO pointed out.

Overall consumer prices were 4.6% higher in December for urban residents compared to 4.9% in November, while rural consumers faced a steeper price rise of 5.8%, just marginally below the 5.95% recorded in the previous month.

On a month-on-month basis, the Consumer Price Index (CPI) was down 0.56% in December while the Consumer Food Price Index (CFPI) was 1.5% below November’s number. Urban consumers saw a much more marked decline here as well, with a 0.62% dip in their CPI and a 1.73% fall in the CFPI. By contrast, the rural CPI was down 0.5% and food prices dipped 1.3% sequentially.

While food inflation had also cooled to a four-month low, marking the second month of deceleration from October’s 15-month high of 10.9%, some critical food items reported faster upticks in prices. This included edible oils and fats, whose prices rose 14.6%, up from November’s 30-month peak inflation of 13.3%.

Vegetables inflation moderated at a slow pace from 29.3% in November to 26.6%, while Fruit prices accelerated again by 8.5% after easing to a 7.7% pace in November. Cereals inflation stood at 6.5% in December, from 6.9% in the previous month.

Pulses prices rose 3.8%, relative to 5.4% in November, marking the slowest inflation in over two years. However, other protein sources such as eggs (6.85%) and meat and fish (5.3%) reported higher inflation in December, while milk price rise was virtually unchanged at 2.8%.

Among non-food items, personal care and effects’ inflation eased a tad to 9.7% from 10.4% in November, while education inflation was unchanged at 3.9%. Health inflation inched up fractionally to 4.05% in December.

In November, a Cabinet Minister reportedly stated at a press conference that the Reserve Bank of India (RBI) should focus on growth and not be concerned with food price inflation. Though the Minister clarified that he was speaking in his personal capacity, it is not in the spirit of things that once the central bank has been given a mandate to target an inflation index that includes the price of food, a member of the executive advises it in any way, leave alone exhorts it to target something else. The comment perhaps reflects some nervousness, on behalf of the government, about the performance of the economy. This would not be unfounded. The media has made references to declining consumption expenditure in the economy, though it is not evident in the national income statistics, available up to 2022-23. But there have been reports of the slow growth of sales of companies in the fast-moving-consumer-goods (FMCG) segment during the current financial year. This is a fairly reliable source of information on consumption growth. There is, however, a more overarching reason why the government would be concerned about growth in the economy, which is based on a longer view.

Not a comforting story

We now have national income data for a decade since 2014, enabling a broad evaluation of economic performance during the tenure of the Modi government. First, at the aggregate level, the average annual growth of the economy is lower since 2016-17. The decline is substantial too. At 7.1% for the period 2004-05 to 2015-16 and 5.2% for the period 2016-17 to 2023-24, it amounts to 27%. National income data for the sectors is less up to date but extends enough to make a confident assessment, and it would be as follows. Of the 11 sectors at the initial level of disaggregation, only one, namely ‘Real Estate’, shows a higher growth rate since 2014. Interestingly, for all of the policy focus on manufacturing, this sector actually slowed after 2014. Having grown at well over 7% per annum from 2006-07 to 2014-15, its growth slowed to just over 5% afterwards. This extent of decline in the rate of growth of manufacturing across successive growth phases is by far the highest since Independence while the percentage increase in the rate of growth of the real estate sector since 2014 is not the highest, having been exceeded in the 1980s. This would not be a comforting story for any government that takes pride in its growth performance.

While the government is vocal on growth, it remains silent on inflation. This is telling, as the October print for inflation shows that it breached the 6% mark, the upper tolerance level granted to the RBI, while food-price inflation breached the 10% mark. There is an assumption, commonly held by a section of the economics profession that was voiced by the Minister when he encouraged the RBI to ignore food price inflation. It is that the price of food is volatile, and its fluctuations cancel themselves out over time.

A structural problem

This, however, has been proven to be wrong, at least in India. Food inflation rose in 2019-20 and has remained elevated since. That it rose before the COVID-19 pandemic and has persisted even as growth has recovered gives us an idea of why the assumption is wrong. Recent inflation in India is not related to some temporary supply-chain disruptions, as, for instance, in the United States, where it has declined considerably post pandemic even as growth has recovered. Inflation in India is a structural problem reflecting the type of growth it is experiencing, one in which agricultural production is not expanding at the rate at which the demand for its products is rising. Further, and relevant in the context, food price inflation triggers a wage price spiral in the rest of the economy, which can continue for a while even if food prices decline.

The implication for welfare of the inflation we are currently experiencing is obvious. High inflation, especially of food products, adversely affects the well-being of those whose income does not keep pace with the inflation. The growth impact is less obvious, but surely is there. As household budgets are stretched to accommodate the higher cost of food, the demand for other goods and services must grow less fast. Non-agricultural output and employment growth now slows down. A mechanism of this kind is likely to have played a role in lowering the rate of growth of manufacturing production in recent years. From the data in the Ministry of Statistics and Programme Implementation’s ‘National Accounts Statistics 2024’, we can see a correlation between the rise in food price inflation from 2019-20 onwards and manufacturing growth since, with the annual rate of change of the latter actually negative in two out of the five years since. So, while the Minister is right to suggest that the RBI’s capacity to rein in food inflation is weak, he is wrong to suggest that food price inflation need not be controlled. If food price inflation were to be taken out of the RBI’s brief without an alternative proposal for its control, India would be left bereft of an anti-inflation policy. Uncontrolled inflation can throw sand in the wheels of growth itself.

Presently, the problem facing India’s economy is not the lack of growth. The provisional estimate for GDP growth in 2023-24 (over 8%) is quite high by historical standards. The problem lies in its inequitable distribution across the population, partly induced by food price inflation. The Minister’s observation should induce the government to re-focus current economic policy from growth to inflation.

Pulapre Balakrishnan, Honorary Visiting Professor, Centre for Development Studies, Thiruvananthapuram

Representational image of an aerial view of a footpath market in Bengaluru. Food price inflation decelerated to 8.9% in November 2024 from a 25-month high of 11.6% in October
| Photo Credit: Sudharaka Jain

India’s wholesale prices rose at a three-month low pace of 1.89% in November, easing from October’s 2.4% uptick, with food price inflation decelerating to 8.9% from a 25-month high of 11.6% in the previous month, even as manufactured products’ inflation accelerated to 2%.

Inflation in primary articles eased to 5.5% from 8.1% in October, while fuel and power remained in deflation zone, with prices falling 5.83% year-on-year.

On a sequential basis, the Wholesale Price Index (WPI) was down just 0.06%, led by a 1.2% fall in primary articles and a 0.45% decline in the Food Index. By contrast, fuel and power prices were up 1.2%, breaking a two-month streak of sequential declines, while manufactured products were 0.4% pricier than October.

EDITORIAL | Price worries: On inflation

Among manufactured products, some of the important groups that showed month-over-month increase in prices are food products, furniture, non-metallic mineral products, pharmaceuticals, medicinal chemical and botanical products and electrical equipment, the Commerce and Industry Ministry said.

Vegetable inflation that had soared over 63% in October, more than halved to 28.6%, but potato prices rose an alarming 82.8%, up from a little over 78% recorded in the previous two months. Onion inflation, which had halved from 78.8% in September to 39.25% in October, fell dramatically to a mere 2.85% in November.

The Ministry attributed November’s wholesale price inflation pace to the increase in prices of food articles, food products, other manufacturing, textiles, machinery and equipment.

Food products’ inflation hardened to 9.5% in November from 7.8% in the previous month, while edible oils and fats’ prices surged 28% from 20.2% in October. The price rise in fruits and pulses decelerated to 8.4% and 6%, respectively, but some other food items continued to see persistently higher inflation, including wheat (8.4%) and paddy (7.6%).

New Delhi:

India’s food inflation is likely to ease, while the growth outlook for the economy is “cautiously optimistic” for the coming months as the agricultural sector is likely to benefit from favourable monsoon conditions, increased minimum support prices and adequate supply of inputs, according to the Finance Ministry’s monthly economic review released on Monday.

India’s retail inflation jumped in October 6.21 per cent, a 14-month high, driven by elevated food inflation in a few vegetables. Supply disruptions from heavy rains in major producing states contributed to price pressures on tomatoes, onions, and potatoes.

However, the bright agricultural production prospects make the inflation outlook benign, despite existing price pressures on select food items. Early November trends signalled moderation in key food prices, though geopolitical factors may continue to impact domestic inflation and supply chains, the report states.

Amid a clouded global background, and after a brief period of softening momentum over the monsoon months, many high-frequency indicators of economic activity in India have shown a rebound in October.

These include indicators of rural and urban demand and supply side variables like the Purchasing Managers’ Index and E-way bill generation, the report states.

On the employment front, the formal workforce is expanding, with notable increases in manufacturing jobs and a strong inflow of youth into organized sectors, it added.

As far as the external sector is concerned, the report states that India’s export recovery may encounter challenges due to softening demand in developed markets.

However, trade in the services sector is sustaining momentum. Apart from the emerging indications of domestic growth and stability, the dynamics of global interest rates, earning growth and valuation, geopolitical developments, and policy decisions of the next administration in the US will determine the course of trade and capital flows.

Recent developments in the ongoing conflict between Russia and Ukraine have caused some concern in financial markets with safe-haven assets such as US Treasuries and gold finding a bid. Geopolitical conditions remain fragile, it added.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Potato and Onion prices were up 78.1% and 78.8%, respectively, in September, accelerating from the previous month, while fruits and pulses inflation eased marginally from the previous month at 12.2% and 13%, respectively. File
| Photo Credit: The Hindu

Inflation in India’s wholesale prices increased to 1.84% in September from 1.31% in August, with food prices surging 9.5% from a 10-month low of 3.3% in August as vegetables became nearly 49% costlier than last year, Government data released on Monday (October 14, 2024) showed.

The Wholesale Price Index (WPI) slightly increased due to a 4% drop in fuel and power prices from last September and a slight decrease in manufactured product inflation, easing a tad to 1%.

On a month-on-month basis, the WPI increased by 0.06%, with the food index showing the highest gain of 1.1%. Meanwhile, manufactured goods and primary articles’ prices increased by 0.14% and 0.41%, respectively.

Potato and Onion prices were up 78.1% and 78.8%, respectively, in September, accelerating from the previous month, while fruits and pulses inflation eased marginally from the previous month at 12.2% and 13%, respectively.

“The positive rate of inflation in September, 2024 is primarily due to the increase in prices of food articles, food products, other manufacturing, the manufacture of motor vehicles, trailers & semi-trailers, the manufacture of machinery & equipment and so on,” the Commerce and Industry Ministry said.

Cereals and paddy inflation eased fractionally to 8.1%, but wheat prices rose at a faster pace of 7.6% during September. Milk inflation cooled a bit to 3.2%, while eggs, meat and fish prices fell 0.8%, marking the second successive month of year-on-year decline in prices. Fuel and power prices fell 0.8% from August 2024 levels.

Manufactured food products’ recorded an inflation of 5.5% in September, while vegetable and animal oils and fats were up 10.5%, albeit on a benign basis last year when prices had fallen for both.

The retail price of unpeeled garlic has gone up to ₹500 per kg. Bigbasket price is also ₹500 after giving discount from list price ₹720.

Pulses put on display for sale at wholesale grocery market in New Delhi. File photo
| Photo Credit: The Hindu

Inflation in India’s wholesale prices slid to a four-month low of 1.31% in August from 2.04% in July, aided by a slight moderation in the pace of price rise in food items and manufactured goods, and fuel and power costs slipping into a mild deflation of 0.7% from a 1.7% uptick in the preceding month, government data released on Tuesday (September 17, 2024) showed.

Food inflation eased from 3.6% in July to 3.3% in August, but this was again spurred by a year-on-year decline in prices for vegetables and eggs, meat and fish, which dropped 10% and 0.7%, respectively.

Base effects played a key role in this moderation as vegetable prices were up 48.4% last August. Inflation in primary food articles stood at 3.1% from a steep 11.4% a year ago, but several items witnessed a sharp spurt in prices despite last year’s high base.

Cereals inflation remained firm at 8.44%, with paddy prices up 9.1% and wheat inflation accelerating to 7.3% from July’s 7% rate. Pulses inflation was a sharp 18.6, while potato inflation picked up further to 78% in August.

The price rise in onions stayed sharp at 65.75%, although below the 88.8% rise recorded in July. Inflation in fruits picked up to 16.7%, from 15.6% in July, while milk inflation offered some respite at 3.5%, compared with 8.5% a year ago.

The Food Index was down 1.13% from July levels, compared with the six-month high of a 2.7% sequential recorded in July.

Economists expect some of the gains in primary food articles inflation in August to reverse in line with base effects from last September, when they rose 3.8%, kicking in. “This would exert upward pressure to the headline wholesale inflation print for September 2024, which could rise to around 2% in from August’s 1.3% mark,” said Rahul Agrawal, senior economist at ICRA.

Manufactured products’ prices reversed a three-month rising streak with an inflation of 1.22% in August, from 1.6% in July. They were 0.07% lower on a month-on-month basis. 

Fuel and power prices rose 0.14% month-on-month, but were 0.7% below last August levels, which again marked a reversal of gradual upticks over the previous three months. 

Tracking rising temperatures is becoming a better way of forecasting food inflation in India than the rain patterns economists have typically relied on, according to HSBC Holdings Plc.

The link between extreme heat, exacerbated by climate change, and the price of agricultural commodities in India has strengthened over the past decade, the bank said in a report released Thursday. The correlation between temperatures and cost of perishable staples such as fruit and vegetables in the country rose to 60% this year from 20% in 2014, it said.

Inflation remains well above the Reserve Bank of India’s 4% target due to volatile food costs, prompting the authority to hold its policy rate for the last year and a half.

HSBC said it expects consumer-price gains to ease toward the end of the year as temperatures drop after the summer heat wave. But “over the medium term, rising temperatures could become a big problem for inflation management,” it said.

Analysts used to estimate food inflation changes by looking at the levels of India’s reservoirs, a measure that the bank’s economists said may soon become obsolete.

This is possibly due to improved irrigation systems that mitigate the impacts of scarce rainfall, while there is currently no solution to shield crops from extreme heat, they said.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Inflation in consumer prices eased to a nearly five-year low of 3.54% in July, with food price rise moderating to 5.4% from a six-month high of 9.4% in June, thanks to base effects from last July when retail inflation stood at 7.4% and the food index was up 11.5%. File
| Photo Credit: Sushil Kumar Verma

Inflation in India’s consumer prices eased to a nearly five-year low of 3.54% in July, with food price rise moderating to 5.4% from a six-month high of 9.4% in June, thanks to base effects from last July when retail inflation stood at 7.4% and the food index was up 11.5%.

Inflation faced by urban consumers dropped to just under 3% in July, from 4.4% in June, while rural consumers experienced a relatively higher price rise of 4.1%, down from 5.7% in June.

Food price rise was also higher in rural India at 5.9% compared with 4.6% in urban parts of the country. In June, rural food inflation was lower at 9.15% while urban food prices were up 9.6%.

“During the month of July 2024 there is a decline in inflation for all the groups. Significant decline is in the vegetables, fruits and spices subgroups,” the Ministry of Statistics and Programme Implementation said.

July’s inflation rate marks a sharp dip from the four-month high of 5.1% recorded in June, and is the slowest uptick in prices recorded since September 2019.. This also means that this is the first time since then that the inflation rate has gone under the 4% median target pursued by the Reserve Bank of India (RBI) in its monetary policy.

This is the first time in nine months that food inflation has dropped below 8%

At its latest monetary policy review last week, the RBI had retained the average inflation projection for this year at 4.5%, but had raised the estimate for the July to September quarter to 4.4% from 3.8% projected earlier. This suggests that price rise will regain momentum over this month and next, with an average inflation of over 4.8%.

New Delhi:

The central government’s timely interventions and stability measures by the Reserve Bank of India (RBI) helped maintain retail inflation at 5.4% despite the pandemic and geopolitical tensions, according to the Economic Survey 2024.

Headline inflation, which the RBI expects at 4.5% in FY25 and 4.1% the following year, is “under control”, said Finance Minister Nirmala Sitharaman. The inflation rate of some food items, however, is elevated, the government admitted.

Economic Survey 2024, which gives an insight into the current state of the economy, was tabled by the Finance Minister in the Parliament this morning, a day before presenting her seventh Budget.

The survey said supply disruptions caused by the COVID-19 pandemic and global conflicts led to an increase in the prices of consumer products and services in FY22 and FY23. However, timely policy interventions by the government helped maintain the retail inflation at 5.4% in FY24, it added.

This is the lowest the retail inflation has eased since the pandemic.

The survey also attributed the low retail inflation rate to price cuts for LPG and fuel by the government. The government reduced LPG prices by Rs 200 across India last August and cut petrol and diesel prices by Rs 2 this March.

The RBI raised policy rates by a cumulative 250 bps between May 2022 and February 2023, managed liquidity levels efficiently, and maintained consistent and coherent communication with market participants, the effect of which was reflected in the latest inflation data, the survey said. The retail inflation for last month was at 5.1%.

The core inflation has declined to a 4-year low, the survey added.

Food inflation, which stood at 6.6% in FY23, increased to 7.5% in FY24. The survey attributed the rising food prices to adverse weather conditions, depleted reservoirs, and crop damage, which impacted farm output and food prices.

Tomato prices spiked due to region-specific crop disease, early monsoon rains, and logistical disruptions, it said.

The survey also said that the Indian economy has recovered and expanded in an orderly fashion post pandemic. The economy is expected to grow between 6.5% and 7% this financial year, the government said.