Food Inflation Likely To Soften As India Braces For A Normal Monsoon

Crisil Ratings in a report has said that India's food inflation is expected to decrease with the onset of the monsoon season. While for the past four months, it has stayed above 8.5 per cent, seasonal pressures in May kept it high and unchanged since April at 8.7 per cent.

The arrival of the southwest monsoon is expected to impact the next few months and a sharper easing of inflation is anticipated as it advances. Inflation may average to 4.5 per cent for this fiscal, the report added. 

It added, “Vegetable inflation was also rigid at 27.3 per cent compared with 27.8 per cent. TOP (tomatoes, onions, potatoes) and non-TOP vegetables inflation continued to diverge for the third straight month. TOP inflation rose to 46.5 per cent from 45 per cent while non-TOP vegetables inflation eased to 18,8 per cent.”

Inflation hardened on-month in potatoes (55.4 per cent against 53.6 per cent) and onions (38.1 per cent against 36.7 per cent). There was a slow deflation in edible oils and milk. The former stood at 6.7 per cent in May compared with -9.4 per cent in April. 

Notably, milk inflation eased at 2.6 per cent in May and down 40 bps from April. Meanwhile, spices inflation eased sharply from 7.8 per cent to 4.3 per cent.

Further, fuel inflation remained negative and core inflation eased. Prices of liquefied petroleum gas prices fell to 24.9 per cent and electricity inflation eased to 10 per cent. Core inflation also followed a trend downwards to 3 per cent from 3.2 per cent.

Additionally, the Index of Industrial Production (IIP) slowed to 5.0 per cent in April from 5.4 per cent in March. It is expected that the gross domestic product (GDP) growth will slow down to 6.8 per cent this fiscal from 8.2 per cent in the previous fiscal.