SBI Research Predicts Stable Inflation Despite Monsoon Surplus and La Nina Impact
With the monsoon progressing satisfactorily and a 2% surplus to date, SBI Research expects inflation to remain within the RBI target for 2024-25. The area under Kharif crop cultivation has shown a 2.9% increase on a yearly basis.
However, La Nina could bring excess rainfall, potentially causing crop loss and negatively impacting food prices, according to a report by Soumya Kanti Ghosh, Group Chief Economic Advisor at SBI Research. La Nina typically brings cooler temperatures and increased rainfall.
Retail inflation is likely to average 4.6-4.7% for 2024-25, although it breached 5% in June. As of August 2, 2024, cumulative Kharif sowing stood at 905 lakh hectares, 82% of the full season normal acreage and 3% higher than the previous year.
Despite this progress, some major foodgrain-producing states are still in deficit. The IMD’s forecast of above-normal rainfall is expected to help replenish reservoir levels and further Kharif sowing.
Farmers in India have sown Kharif crops across 904.60 lakh hectares so far this year, compared to 879.22 lakh hectares in the same period last year. Sowing of paddy, pulses, oilseeds, millets, and sugarcane has increased year-on-year, while cotton and jute/mesta sowing has declined.
India has three cropping seasons: Summer, Kharif, and Rabi. Kharif crops are sown during June-July and harvested in October-November, relying heavily on monsoon rains. The timely occurrence of monsoon rainfall is crucial for the Indian economy, as nearly 45% of India’s population depends on agriculture.
Rising food prices have doubled food inflation to 8.36% in June, compared to 4.63% in the same month of 2023. Retail inflation for all food segments has risen month-on-month, affecting Indian consumers. Overall retail inflation also increased in June, driven by rising food prices. Retail inflation data for July will be released early next week.
Doubts Revealed
SBI Research -: SBI Research is the research and analysis wing of the State Bank of India (SBI), which is the largest bank in India. They study economic trends and make predictions about things like inflation.
Inflation -: Inflation is when the prices of goods and services go up over time. It means you need more money to buy the same things.
RBI -: RBI stands for Reserve Bank of India. It is the central bank of India, which controls the money supply and interest rates to keep the economy stable.
Monsoon Surplus -: Monsoon surplus means that there is more rainfall than usual during the monsoon season. This can affect farming and crop production.
La Nina -: La Nina is a weather pattern that causes cooler ocean temperatures in the Pacific Ocean. It can lead to more rainfall in some parts of the world, including India.
Kharif Crop -: Kharif crops are the crops that are sown during the monsoon season in India, like rice, maize, and cotton. They are harvested in the autumn.
Retail Inflation -: Retail inflation is the increase in prices of goods and services that people buy for their daily needs, like food, clothes, and fuel.
Hectares -: A hectare is a unit of area measurement used in farming. One hectare is about the size of a football field.
Food Inflation -: Food inflation is the increase in prices of food items. When food inflation is high, it means that food is becoming more expensive.
