Experts Predict Food Prices to Drop Soon Despite Recent Inflation Spike
New Delhi, India – Economic experts are hopeful that food inflation will decrease in the coming months, despite a recent report showing that food inflation in June almost doubled to 8.3 percent compared to last year.
Impact of Monsoon on Food Prices
Dharmakirti Joshi, Chief Economist at CRISIL, explained that a normal monsoon could help reduce food inflation. He noted that while June rains were below average, the rains in July and August are more crucial for the kharif crop season. Improved monsoon and increased sowing are expected to boost agricultural output and lower food prices.
Government Data and Expert Opinions
Government data revealed that retail inflation for various food items, including cereals, meat, eggs, milk, oils, fruits, vegetables, pulses, sugar, spices, and snacks, increased month-on-month. Ashok Gulati, a professor at the Indian Council for Research on International Economic Relations (ICRIER), emphasized the need for more investment in agricultural research and development to enhance productivity and build efficient value chains.
Core Inflation Concerns
M Govind Rao, a member of the Fourteenth Finance Commission, warned that core inflation, which excludes food, might rise due to higher international freight costs, crude prices, and domestic telecom price hikes. He mentioned that achieving the four percent inflation target remains challenging.
Industry Insights
Sanjeev Agrawal, President of the PHD Chamber of Commerce and Industry, expects food prices to stabilize soon, predicting that overall inflation will settle between 4 and 4.5 percent. He noted that food and beverage inflation rose from 7.9 percent in May to 8.4 percent in June, while overall inflation increased slightly from 4.8 percent to 5 percent.
Future Outlook
Experts highlighted the importance of the kharif sowing season in controlling food inflation. They also pointed out that global commodity prices have eased recently, but geopolitical tensions could still impact supply chains and prices. Rajani Sinha, Chief Economist at CareEdge Ratings, expects food inflation to moderate as new harvests arrive and the base effect plays out. She predicts an average inflation rate of 4.8 percent for FY25 and anticipates a potential policy interest rate cut by the RBI in the second half of the fiscal year.
