Analysts predict that in the next three to four months, food inflation would drop significantly from its present levels due to favorable weather, improved rabi sowing, and above-normal monsoon rainfall.
However, they claim that the prices of grains and edible oils continue to be a worry and represent a short-term upside risk to the inflation trend. In the fourth quarter of FY25, the consumer food price index (CFPI) inflation rate, which has averaged 8.4% from April to December, would decline to about 6%. This would cause the CPI inflation rate to dip below 5% in Q4. However, analysts do not believe that inflation will slow down any more from that level. As a result, CPI inflation for FY25 could be between 4.8 and 5%, or 30 to 50 basis points higher than the RBI’s prediction.
“Overall, the arrival of fresh harvests has led to a seasonal correction in food prices in recent months. We anticipate that headline inflation will fall below 5% by Q4 FY25, driven by a moderation in food inflation,” noted Rajani Sinha, chief economist, CareEdge Ratings.
But so far, major oilseed sowing has decreased by about 4% annually, which has caused concern, she said. According to Sinha, “it will be crucial to closely monitor inflation in this category given the country’s reliance on edible oil imports, especially considering high global edible oil prices and the recent increase in custom duty.” “Moreover, given the stable cereal prices (rice and wheat), we don’t see a very sharp decline in food inflation below 6% over the next 3-4 months,” stated Suman Chowdhury, chief economist at Acuite Ratings & Research.
Due to a hike in the minimum support price and low carry forward stock with both private and government agencies, retail wheat inflation rose from 2.31% at the start of the year to 7.84% in December 2024. In contrast, rice inflation decreased from 8.19% in January 2024 to 7.44% in December 2024.
As of right now, more rabi tomatoes, onions, and potatoes have been sown than at the same period last year, according to a Department of Consumer Affairs official note. Additionally, according to data from the agriculture ministry, 64 million hectares (mha) of land have been planted so far for other rabi crops, including wheat, pulses, and oilseeds, up from 63.74 mha during the same period previous year.
