The survey found that specific measures were needed to stabilise prices of food items that recorded high inflation in recent times such as milk and edible oils
| Photo Credit: SANDEEP SAXENA

Inflation risk outlook in India is under control in the short run, but requires policy measures to achieve long-term price stability, according to the Economic Survey of India 2023-24, tabled in Parliament on Monday.

India’s inflation will align with target rates by 2025-26, considering normal monsoons and no further external shocks, Chief Economic Advisor V. Ananth Nageshwaran said in the Economic Survey.

Also read: Economic Survey 2023-24 updates

The RBI forecast a retail inflation of 4.5% in 2024-25 and 4.1% in the year after, citing the April Monetary Policy Report. “The short-term outlook for India is benign,” the survey added, while highlighting reasons and measures to achieve long-term measure stability, especially in food prices.

The CEA suggested the need for high frequency price data of essential food items to enable monitoring of prices at every stage of production – from farm to shelf – as part of a broader strengthening in the statistical system. The survey stressed the need to equip the Ministry of Statistics and Programme Implementation (MoSPI) to produce and integrate all required statistics in addition to increased quality and timeliness of data.

Constructing a producer price index for goods and services can help get a “greater grasp of episodes of cost-push inflation,” the CEA wrote in the Economic Survey. Mr. Nageshwaran suggested that the weightages of items in the consumer price index be revised according to the results of the recently released HCES 2022-23.

The survey found that specific measures were needed to stabilise prices of food items that recorded high inflation in recent times like pulses, tomato, onion, milk and edible oils.

Vegetable prices increased at a pace of 14.9% in 2023-24, significantly faster than the 3% print in the previous year. Uneven rainfall and region-specific diseases were responsible for onion and tomato inflation.  The CEA suggested the government assess the progress of modern storage facilities for crops such as tomato and onion, which are subject to seasonal price surges and availability of these during seasons of high demand.

Reduced production of pulses in the past two years, due to adverse weather conditions, were responsible for the increase in prices of the crop. Pulses recorded an inflation of 15.2% in the reporting year, significantly higher than the 2.4% recorded in 2022-23. Concentration of pulse production in a small number of states and districts was cited as one of the reasons for lower production and a subsequent price rise in the crop, the CEA added. 

An expansion in the area under pulses, especially tur, lentil and urad dal is needed to moderate the inflation in the crop, the survey found. The survey further suggested promoting summer cultivation of moong and urad in areas with assured irrigation.

An increase in edible oil consumption and a subsequent increase in import dependence were responsible for the increase of the crop.  Promoting domestic production of edible oils and expanding the scope of the National Mission on edible oil, beyond palm oil, can help moderate prices of oil seeds, the CEA said in the Economic Survey.

The CEA also suggested focused efforts to promote production of non-conventional edible oils, including rice bran and corn oil in addition to increasing production to major oils.