Food prices to decrease during monsoon in India, reports Finance Ministry

The recent monthly economic review by the finance ministry has highlighted optimistic prospects for food prices in India, with expectations of a significant reduction following the prediction of above-normal monsoon by the India Meteorological Department (IMD). The report indicates that this forecasted rainfall will likely lead to higher crop production, contributing to the anticipated easing of food prices.

According to the March 2024 economic review, food inflation in India has shown a decline from 8.7 per cent in February to 8.5 per cent in March. The primary drivers of higher food inflation were noted to be the increased prices of vegetables and pulses. In response, the government has implemented various measures to stabilize prices, such as imposing stock limits to prevent hoarding, strengthening food item buffers, and facilitating imports of essential food items through designated retail outlets.

The government's efforts also include negotiating long-term contracts for pulse imports with new markets like Brazil and Argentina. Negotiations are nearing completion for importing urad from Brazil and arhar from Argentina, adding to existing contracts with countries like Mozambique, Tanzania, and Myanmar for pulse imports.

Regarding vegetables, a recent CRISIL report suggests a potential easing of vegetable prices post-June, citing IMD's prediction of an above-normal southwest monsoon in 2024. However, the report underscores the importance of the monsoon's distribution for favorable price outcomes. The month of March witnessed a vegetable inflation rate of 28.3 per cent, a slight decrease from February but significantly higher compared to the deflation observed a year earlier.

While these developments offer hope for price stabilization, the Reserve Bank of India (RBI) has expressed concerns about escalating food prices. The central bank acknowledges the positive impact of a record Rabi crop on cereal prices but highlights potential risks from weather shocks and geopolitical tensions affecting oil prices.

Globally, high food inflation remains a challenge in various major economies, emphasizing the ongoing need for concerted efforts to address food price pressures.