Food inflation may ease on lower prices of vegetables

Food inflation should be tackled through non-monetary measures, says Eco Survey, emphasising the importance of supply-side interventions and fiscal policies. However, it refrained from reiterating the point made in last year’s survey about the inadequacy of monetary policy to address food prices.
The survey expects food inflation to ease in Q4 FY25, driven by seasonal reductions in vegetable prices and Kharif harvest arrivals, with strong Rabi production likely to help stabilise prices in the first half of FY26.Despite this, risks remain from adverse weather and rising international agricultural commodity prices. While global energy and commodity prices have softened, the core inflation outlook remains manageable, though global political and economic uncertainties continue to pose challenges.
A normal southwest monsoon in 2024 has improved water levels in reservoirs, ensuring sufficient irrigation for the rabi crop. According to the first advanced estimates for 2024-25, Kharif foodgrain production is expected to rise by 5.7%, with rice and tur output projected to rise 5.9% and 2.5%, respectively, compared to FY24. This should help ease food inflation pressures, although rising international vegetable oil prices may still pose an upside risk. The govt has focused on controlling food inflation through various supply-side measures, including strengthening buffer stocks, periodic open market releases, subsidised retail sales, easing imports and preventing hoarding through stock limits.