Food Prices Could Climb Again As Global Uncertainty Grows, Says Report

Despite a positive outlook for food price stability supported by the India Meteorological Department's normal monsoon forecast, analysts at Centrum remain cautious of potential upside risks.

The report expects inflation to average at 2.9 per cent in the first quarter of the fiscal year 2026, in line with the RBI's projection. 

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Volatile global commodity prices and ongoing geopolitical tensions could disrupt supply chains and fuel inflationary pressures impacting food prices, said a report by Centrum.

Despite a positive outlook for food price stability supported by the India Meteorological Department's normal monsoon forecast, analysts at Centrum remain cautious of potential upside risks.

"We remain cautious of potential upside risks stemming from volatile global commodity prices and geopolitical tensions, which could disrupt supply chains," the report added.

The report added that regular monsoons will strengthen the case for ongoing low inflation in the near future. "IMD's forecast of normal monsoon further supports the outlook for sustained food price stability and reinforces the case for continued low inflation in the near term," the report added.

In its latest policy rate announcement in the ongoing month, the RBI slashed repo rate by 50 basis point (bps), recording a total of 100 bps in the calendar year (CY) 2025 so far. The Central Bank shifts to a neutral stance highlight its growing comfort with the inflation trajectory and a renewed focus on supporting growth, while still acknowledging the global uncertainties.

On the inflation front, the latest government data shows a declining retail inflation or CPI at 2.8 per cent in the month of May from its 3.2 per cent of April.

This was mainly on account 64 bps drop in food and beverages (F&B) prices. Inflation in Food and Beverages, on YoY basis, slowed from 2.14 per cent to 1.5 per cent, which is the lowest print since May 2019. Vegetable prices continued to see contraction, recording a print of 13.7 per cent due to the seasonal effect and a higher base last year, with just 5 out of 21 sub-indices recording growth for the month.

Among the leading basket items, onion prices saw a sharp contraction compared to April, was down by 10.7 per cent compared to positive 2.9 per cent QoQ and 40 per cent in May 2024. Inflation in potato deepened further by -20.3 per cent compared to -12.7 per cent and tomato prices continued its correction for the fifth month straight down 26.2% compared to -33 per cent in April.

Inflation in Oils basket continued to be elevated, rising from 17.5 per cent to 18 per cent mainly due to higher customs duty to support domestic production, the sub-index recorded double digit price increase for seven straight months.

The report expects inflation to average at 2.9 per cent in the first quarter of the fiscal year 2026, in line with the RBI's projection. 

(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)