Union Bank of India Predicts Lower Food Prices Due to Good Monsoon and Crop Sowing
Union Bank of India has noted in a report that food inflation, which has recently moderated, is expected to decrease further in the coming months. This is attributed to the progressing Southwest monsoon and sufficient water in reservoirs across regions.
The report highlights that a rise in reservoir levels and improved sowing of kharif crops are expected to keep supply-side concerns at bay for some time. However, it cautions that any negative surprises, such as a deficit of rain or flooding, could trigger an increase in food price inflation.
Retail inflation CPI significantly softened in July to 3.54% from over 5% in the previous month. Food inflation is currently at an over-a-year low. Kharif crop sowing is progressing steadily, with farmers planting crops across 1,087.33 lakh hectares so far, a 1.91% increase compared to 1,066.89 lakh hectares in the same period last year. Sowing of paddy, pulses, oilseeds, millets, and sugarcane has been higher year-on-year, while cotton and jute/mesta sowing has been lower.
In the 2023 Kharif season, the total area under cultivation across the country was 1,107.15 lakh hectares. On the monsoon front, cumulative rainfall over the country has turned from a deficit to an 8% surplus. Rainfall picked up steadily in August, although uneven spatial distribution remains a concern. The south Indian region continues to run a surplus of 26%, while the east and northeast Indian regions face a deficit of 13%. The major crop-cultivating northwest region has improved from an 18% deficit in July to a 4% surplus now.
The Indian Meteorological Department (IMD) recently updated its forecast, predicting that rainfall over the country during September 2024 is most likely to be above normal, at 109% of the Long Period Average. Above-normal rainfall is expected over most parts of India, except for some parts of extreme north India, many parts of south Peninsular India, and most parts of northeast India where normal to below-normal rainfall is expected.
Doubts Revealed
Union Bank of India -: Union Bank of India is a big bank in India where people keep their money and take loans. It also gives reports about the economy.
Food inflation -: Food inflation means the prices of food items like vegetables, fruits, and grains going up.
Southwest monsoon -: The Southwest monsoon is a season in India when it rains a lot, usually from June to September. This rain is very important for farming.
Reservoirs -: Reservoirs are big storage places for water, like lakes or tanks, which help in providing water for farming and drinking.
Sowing -: Sowing means planting seeds in the ground to grow crops.
Kharif crops -: Kharif crops are the crops that are planted during the rainy season, like rice, maize, and cotton.
Indian Meteorological Department -: The Indian Meteorological Department is a government organization that tells us about the weather and how much it will rain.
Above-normal rainfall -: Above-normal rainfall means more rain than usual, which is good for crops and farming.
