Going forward, food inflation is likely to soften in the fourth quarter of the current fiscal (Q4FY25)
While highlighting the moderation in the country’s headline inflation in the April to December period of the current financial year (FY25) compared to FY24, the Economic Survey stated that India’s retail price inflation is estimated to align progressively with the target
Core inflation reached its lowest point in a decade, while food inflation was affected by supply chain disruptions and adverse weather conditions during the current fiscal, as per the survey. In December 2024, the Reserve Bank of India’s (RBI) Monetary Policy Committee report revised its inflation projection from 4.5 per cent to 4.8 per cent in FY25.
Over the past two years, India’s food inflation rate has remained firm, diverging from global trends of stable or declining food inflation. This can be attributed to factors such as supply chain disruptions exacerbated by extreme weather events and reduced harvest of some food items, as per the Survey.
The Economic survey highlighted that the inflationary pressures in onion remained firm in FY24 and the current year, despite prompt measures by the government to contain prices due to constrained supply resulting from reduced production. “The RBI and the IMF have projected that India’s consumer price inflation will progressively align towards the inflation target in FY26,” stated the survey.
Going forward, food inflation is likely to soften in the fourth quarter of the current fiscal (Q4FY25) with the seasonal easing of vegetable prices and Kharif harvest arrivals. Good Rabi production is likely to contain food prices in the first half of the next fiscal (FY26), as per the Economic Survey. It further stated that on the domestic front, rebounding rural demand augurs well for consumption. Investment activity is expected to pick up, supported by higher public capex and improving business expectations. Capacity utilisation in manufacturing remains above the long-term average.
