ICRA estimates the food and beverages inflation to cross the 8.0 per cent mark this month
The International Credit Rating Agency (ICRA) expects consumer price index inflation to grow at 5.0-5.2 per cent in May 2024.
Data released by the Department of Consumer Affairs (DCA) indicates a mixed trend in retail food prices in May 2024, with a sequential hardening in prices of half of the 22 essential commodities. A fall in the domestic output of few pulses and potatoes in 2023-24, as well as the seasonality in perishables, is likely to have exerted pressure on the prices of such items. The price of rice has remained stable, while the prices of wheat, onion and most varieties of edible oils have softened in the current month compared to April 2024.
In YoY terms, the inflation print for 12 of these 22 items has trended lower in May 2024 compared to the previous month, led by pulses, sugar and milk, whereas wheat and edible oils in the other set of items have displayed a higher YoY print. Overall, ICRA estimates the food and beverages inflation to cross the 8.0 per cent mark in May 2024, partly on account of the adverse base (+3.3 per cent in May 2023 vs. +4.2 per cent in Apr 2023).
According to the report, while the international prices of crude oil have eased in May, food prices are vulnerable to above-normal temperatures and heatwave conditions during the summer season, which is likely to keep food inflation at elevated levels until June. Thereafter, the impending favourable base effects during Q2 FY2025 are expected to materially soften the headline inflation print to 2.5-3.5 per cent in July 2024 and August 2024. According to ICRA, a timely onset and good distribution of monsoon season would be crucial to support agriculture output in 2024-25 and help control food inflation.
