“An increase in headline inflation and food inflation during the month of August, 2025 is mainly attributed to an increase in inflation of vegetables, meat and fish, oil and fats, personal care and effects, and eggs,” the National Statistics Office said. Representational file image.
| Photo Credit: Reuters

Union Finance Minister Nirmala Sitharaman speaks in the Rajya Sabha during the Budget session of Parliament, in New Delhi, Thursday, Feb. 13, 2025.
| Photo Credit: PTI

Food prices are expected to be under control in the coming year, going by advance estimates of crop output, but the government will keep monitoring prices and act to ensure that ordinary citizens are not burdened by inflation, Union Finance Minister Nirmala Sitharaman told the Rajya Sabha on Thursday.

Responding to members’s concerns about high inflation during the discussion in the House on the Union Budget 2025-26, Ms. Sitharaman said the latest Consumer Price Index (CPI) showed price rise eased to 4.31% in January from 5.22% in December and is now close to the Reserve Bank of India (RBI) target of 4%.

“So there’s a steep correction, particularly in potato, onion, and tomato prices, which are key components in the CPI food basket, and additionally, the decline in pulses inflation, supported by tariff-free imports for the pulses we don’t adequately produce domestically for our consumption. As per the RBI’s report of February 7, CPI inflation for 2025-26 is projected to average only 4.2%,” she said.

Before outlining the Budget’s steps to boost output in the farm sector, including targeted interventions for pulses, vegetables, fruits, and high-yielding seeds, Ms. Sitharaman said that food inflation gets triggered “when you have an adverse weather condition and supply chain disruptions”. A Group of Ministers (GoM) is overseeing the situation so that timely imports happen when there is a supply shortfall.

“With the first advance estimates of agricultural production of 2024-25 being what it is, kharif food grain production is expected to rise 5.7% and the production of rice and tur dal is expected to increase by 5.9% and 2.5%, respectively, compared to 2023-24. So the prices of food will be well under the inflation radar, with the kind of advance estimates which we are getting, but despite that, the GoM will be keenly monitoring,” the Minister said.

With the economy expected to grow 6.4% this year, the Budget aims to accelerate growth, secure inclusive development, invigorate private sector investments, uplift household sentiments, and also directly or indirectly enhance the spending power of the rising middle class, Ms. Sitharaman said.

Stressing that the Budget has been made during a “very difficult time” when external challenges are “very severe” and beyond the realm of projections or predictions, the Minister cautioned that this immense uncertainty is still playing out and many Indian imports critical for the economy are also going to be mired in uncertainty.

The world’s economic order is seeing a major change from what used to be the mantras of recent decades, she said, pointing to globalisation being marred by fragmentation, fiscal prudence being hit by the rising debts of countries, and multilateral bodies getting diluted and not exerting themselves while bilateral and regional forums are calling the shots. “Everybody wants a global free market situation but you have aggressive tariff and non-tariff barriers, when it comes to their interests,” she underlined.

“But despite that, we have tried keeping the assessments as close as possible to what can develop, keeping India’s interests topmost… we are trying to make sure that the Budget somewhat at least foresees all this, and is ready for such eventualities,” she said. Ms. Sitharaman said, thanking the more than 90 MPs who spoke in the discussion.

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.)

The first official gauge of the economy’s performance so far in 2024-25 pegs real GDP growth at 6.7% between April and June, a five-quarter low and below the central bank’s projection. The Reserve Bank of India (RBI), which expects a 7.2% GDP growth through 2024-25 following last year’s 8.2% surge, had revised its estimate for Q1 from 7.2% to 7.1%, earlier this month. The actual numbers are underwhelming and mark a clear cooling in the economic momentum, although some base effects are in play. Growth in the Gross Value Added (GVA) in the economy came in higher at 6.8%, after a year of widening divergences with the GDP print. At the onset of this fiscal year, major hopes hinged on a normal monsoon boosting farm sector output and easing inflation, which could lift the weak rural demand and private consumption witnessed last year. Higher demand would bolster private firms’ propensity to invest in new capacities, and ease the pressure on public spending to prop up growth. That the government would still ramp up capital expenditure by 17% to ₹11.11 lakh crore this year, while it waited for this narrative to unfold, was the other pillar underpinning this year’s growth aspirations.

As things stand, this script is yet to fully play out. The stretched general election has sharply scuppered public capex, and the government will need to redouble efforts to meet its spending goals. The good news is that private consumption spends bounced to a six-quarter peak of 7.4%, partly thanks to easing headline inflation. But food prices remain elevated. The monsoon has been better than last year but a tad erratic and uneven, temporally as well as spatially. Farm GVA growth has moved up to a four-quarter high of 2% but the next few weeks will determine whether the sector rebounds in earnest (and food inflation cools). Projections of above normal downpours in September may well affect standing kharif crops. This is a key monitorable for the RBI, whose independent monetary policy panel members have flagged a 1% GDP growth loss this year and next, if interest rate cuts are delayed. India may still grow 6.5% to 7% this year, but most expect growth to slip to 6.5% in 2025-26, with the medium-term potential hovering around that number. This is too slow for comfort. As top IMF official Gita Gopinath pointed out recently, policymakers need to urgently pursue meaningful reforms across all aspects of the economy, and improve the efficiency of its institutions and the judiciary. This is critical to lift its growth potential and fulfil hopes of creating gainful employment for its young, fast enough for India’s demographics to yield a dividend.

Headline inflation has slowed in India mainly because of lower food prices, but the volatility of these prices remains an issue, Moody’s Ratings said.
| Photo Credit: PTI

Volatile and high food prices remain a concern, but base effects may help temper India’s retail inflation pace in June and possibly even cool it below 4% over July and August, rating agencies and economists reckon.

Retail price rise had touched a 12-month low of 4.75% in May, even though food inflation stayed stuck at 8.7% for a second straight month. The National Statistical Office will likely release the Consumer Price Index data for June on Friday.

Headline inflation has slowed in India mainly because of lower food prices, but the volatility of these prices remains an issue, Moody’s Ratings said in a report this week. The agency also flagged stronger wage gains of more than 5% year-on-year.

The prolonged heatwave and the delayed start to the southwest monsoon was likely to have pushed June’s inflation to 5%, said Radhika Rao, executive director and senior economist at DBS Bank. Vegetable prices began to rise sharply as the month progressed, while telecom tariffs were also raised, she pointed out. 

With the monsoon regaining ground this month, vegetable prices were expected to moderate, and base effects would also push July-August inflation to sub-4%, she estimated. Ms. Rao, however, expects no interest rate cuts this year in light of the RBI’s signal that they would look through base effect-driven swings in readings and focus on sticky food pressures. 

In June 2023, retail inflation stood at 4.9%, before it surged to 7.4% and 6.8% in July and August, respectively.

India Ratings and Research expects retail inflation to have moderated to a 13-month low of 4.5% in June, due to a combination of the favourable base effect and a moderation in inflation of key items. But wholesale prices are projected to quicken at a 3.5% pace, from May’s 15-month high of 2.6% due to an unfavourable base.

“Prices of food items such as onion and potato continues to be high, despite softening of inflation in items such as tomato, pulses, milk and sugar,” the agency noted. Tomato inflation was at a six-month low of 29% as per Department of Consumer Affairs data for last month, it 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.

RBI Governor Shaktikanta Das speaks at the Delhi School of Economics Diamond Jubilee Distinguished Lecture, in New Delhi, on Sept. 5, 2023.
| Photo Credit: PTI

Reserve Bank Governor Shaktikanta Das on Tuesday said the central bank is committed to bringing down inflation to 4% and will remain watchful of risks as more frequent global supply shocks can have profound implications on the management of the price situation.

Delivering a lecture at the Delhi School of Economics, the governor said the RBI remains on guard to ensure that the second-order effects in the form of generalisation and persistence with regard to inflation are not allowed to take hold.

The central bank has been mandated by the government to keep inflation at 4% with a margin of 2% on either side.

“The frequent incidences of recurring food price shocks pose a risk to the anchoring of inflation expectations, which has been underway since February 2022. We will remain watchful of this aspect also.”

“The role of continued and timely supply side interventions as is being undertaken by the government assumes criticality in limiting the severity and duration of such food price shocks,” he said.

In these circumstances, he said, it is necessary to be watchful of any risk to price stability and act timely and appropriately.

“We remained firmly focused on aligning inflation to the target of 4%,” he said without giving any timeframe.

He also said that inflation, which had touched a high of 7.4% in July, driven by a rise in vegetable prices, has started moderating.

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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Image used for representational purpose only.
| Photo Credit: Reuters

The wholesale price based inflation remained in the negative territory for the fourth straight month in July at (-)1.36% on easing prices of fuel, even though food articles turned costlier.

The wholesale price index (WPI) based inflation rate has been in the negative since April and was (-)4.12% in June. In July last year it was 14.07%.

Inflation in food articles skyrocketed 14.2% in July against 1.32% in June.

“Decline in the rate of inflation in July, 2023 is primarily contributed by fall in prices of mineral oils, basic metals, chemical & chemical products, textiles and food products,” the commerce and industry ministry said on August 14.

Fuel and power basket inflation eased to (-)12.79% in July from (-)12.63% in June.

In manufactured products, the inflation rate was (-)2.51% as against (-)2.71% in June.

The RBI last week kept interest rates unchanged at 6.5% for the third straight meeting but signalled tighter policy if food prices drive inflation higher.

“The job on inflation is still not done,” RBI Governor Shaktikanta Das had said.

“Inflationary risks persist amidst volatile international food and energy prices, lingering geopolitical tensions and weather-related uncertainties.”

The RBI raised its inflation forecast for the current financial year ending March 2024 to 5.4% from 5.1% earlier, citing pressures from food prices.

The Central bank takes into account retail or consumer price index based inflation for formulating monetary policy. Retail inflation data for July is scheduled to be released later in the day.

A vendor weighs tomatoes for a customer at a vegetable market in Ahmedabad on July 25, 2023.
| Photo Credit: Reuters

India’s retail inflation may have spiked close to or over the 6% upper tolerance threshold of the Reserve Bank of India (RBI) in July, owing to a broad-based uptick in food prices, and could remain sticky in coming months, economists reckon.

This could compel the central bank to stay hawkish and possibly raise its inflation projections for the ongoing July to September quarter (Q2) as well as the full year 2023-24 at its monetary policy review this week, and delay hopes of an interest rate cut.

Also read |Govt stays guarded over prices even as core inflation softens

The RBI’s Monetary Policy Committee (MPC) will meet over three days from August 8 and convey its decisions on Thursday, August 10, while the National Statistical Office will release July’s retail inflation numbers on August 14. The MPC has projected average retail inflation of 5.2% in Q2 and 5.1% for the full year.

Having stayed below the 6% mark for four months in a row, consumer price inflation (CPI) had, however, risen to a three-month high of 4.8% in June owing to a spurt in food prices, particularly, cereals, pulses, milk and tomato prices. This trend firmed up further last month, with tomato prices up almost 176% from a year ago, and tur, rice, salt, milk and pulses rising over 10%, a Bank of Baroda (BOB) report noted.

“We expect CPI to settle around 5.8%. RBI in its coming policy would be continuing with its hawkish pause and might revise its inflation projection for Q2 upwards,” said Dipanwita Mazumdar, economist at Bank of Baroda.

Core inflation may ease

State Bank of India group chief economic adviser Soumya Kanti Ghosh is not as sanguine and expects inflation to hit 6.7% in July, thanks to food inflation, though he expects non-food, non-energy inflation (core inflation) to ease to 5% from 5.1% in June.

Rice prices have spiked the most in the northeast and southern regions, rising 32% and 17%, respectively, with the latter paying the highest price in the country at ₹53.7 per kilogram. Moreover, extreme flooding as well as relatively poor rainfall in some States have affected rice sowing, with the sown area at just 59% of normal area as of July 28. India’s recent non-basmati rice export ban has wreaked havoc for over 140 countries which depend on its supplies, but may bring some relief to consumers, especially in the south, Mr. Ghosh said.

Despite easing core inflation, Nomura economists Sonal Varma and Aurodeep Nandi said the food inflation spike, especially during July-September, would likely result in higher overall inflation this year. “We expect higher food inflation to push headline inflation to 6%-6.5% in July and August, before settling in a 5-6% range over the rest of the fiscal year,” they said.

Mr. Ghosh cautioned that edible oils, whose prices have been subdued in recent months compared to extreme spikes last year after the Russia-Ukraine conflict, could pose fresh pressures. While India has substituted sunflower oil imports from Ukraine with palm oil imports from Malaysia and Indonesia, these could be hit as their crop is likely to be affected by El Niño conditions, he added.