With fresh crops hitting the markets, is India’s retail inflation set for a sharp decline?

India’s retail inflation measured by consumer price index (CPI), which drastically eased to 6.83 per cent in August from 7.44 per cent in July driven by cooling of food prices, is set to keep tapering in the coming months. Notwithstanding the uneven rains this year, Kharif sowing has not been dented. With fresh crops hitting the markets, food supplies including that of vegetables and grains have expanded in the last few weeks.

The supplies are likely to further ease.

Economists told India Narrative that in the coming months, inflation will come down as rapidly as it had spiked with the easing of food supplies. For September, the CPI inflation might ease below the 6 per cent mark, sources noted.

The moderation in prices is mainly in food and beverages with vegetables and cereals exhibiting the most restraint though meat, fish and spices CPI are still at elevated levels, a State Bank of India’s report said. Government authorities are continuously monitoring the situation to ensure that the situation does not go out of control once again.

Sowing of Kharif crops

Sowing of Kharif crops has been spread over 1088 lakh hectares– a tad higher than last year. But importantly, rice sowing area has surpassed 400 lakh hectares compared to 392.81 lakh hectare in the previous year. About 60 per cent of the rice sowing in India takes place during the Kharif season. The remaining production of rice takes place during the Rabi cycle in the winter months.

Sowing of millets and other coarse cereals has also increased. Compared to last year’s 181.24 lakh hectares of area, sowing of millets has spread across more than 182 lakh hectares. However, sowing of pulses has been significantly lower this year. In a bid to control domestic prices, India imposed several export restrictions on food items including rice.

“The delay in monsoon is nothing new..last year too there was a delay in rains but foodgrain production was higher. We need to assess situations more holistically,” an analyst said.

Retail inflation in April, May and June were at 4.7 per cent, 4.31 per cent and 4.8 per cent respectively before surging to 7.44 per cent in July.

“So, barring one month, prices have remained more or less in control,” the analyst said.

Earlier, Prime Minister Narendra Modi while delivering his Independence Day speech said that the government is taking all necessary steps to contain inflation.

“I have to take more steps to see that the burden of inflation goes further down on the citizens of my country. We will take those steps and my efforts will continue,” Modi said.

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