Food Prices Expected To Stabilise With Monsoon Advancement, Say Experts

Inflation, which dropped to a low of 4.75 per cent in May and 4.83 per cent in April, representing 12-month and 11-month lows respectively, showed a reversal in June

Industry experts anticipate a moderation in food prices in the upcoming months, leading to a stabilisation of the inflation trajectory around 4 to 4.5 per cent. India's consumer price inflation (CPI) increased to 5.08 per cent in June compared to the previous year. Despite deficient rainfall in June, experts suggest it is not a significant concern as the July and August rains are critical for the Kharif season.

Dharmakirti Joshi, Chief Economist, Crisil, said, “We expect the progress on monsoons and pick up in sowing to improve agricultural output and cool off food inflation in the coming months.”

Non-food inflation continued its downward trend for the 17th consecutive month, reaching a historic low of 2.3 per cent.

“Net-net, we expect a decline in food inflation in the coming months to drag down headline inflation to an average of 4.5 per cent. That said, no rate cuts are expected in the forthcoming policy as RBI pursues a target of 4 per cent durable inflation,” Joshi highlighted.

Inflation, which dropped to a low of 4.75 per cent in May and 4.83 per cent in April, representing 12-month and 11-month lows respectively, showed a reversal in June, deviating from its recent downward trend.

Sanjeev Agrawal, President of the PHD Chamber of Commerce and Industry (PHDCCI), noted that the CPI inflation for June was primarily driven by an increase in food and beverages inflation, which rose from 7.9 per cent in May to 8.4 per cent in June. “Going ahead, we expect the food prices to stabilise in the coming months and inflation trajectory also to soften and stabilise between 4 and 4.5 per cent,” Agrawal said.

Aditi Nayar, Chief Economist at ICRA, highlighted that apart from food and beverages, inflation across all other sub-groups stayed below the 4 per cent threshold in June. “With nearly 50 per cent of kharif sowing usually taking place in July, adequate rainfall across regions will be critical over the next few weeks to accelerate the pace of sowing,” she said.

ICRA projects that the headline CPI inflation is expected to decrease to 2.5-3 per cent in July, primarily due to a favourable base effect (compared to +7.4 per cent in July 2023), which will partially offset the impact of the increase in vegetable prices.