NEW DELHI, Nov 25: India’s food inflation is likely to ease in the coming months, with a cautiously optimistic economic growth outlook, as the agricultural sector benefits from favourable monsoon conditions, increased minimum support prices, and an adequate supply of inputs. This was revealed in the Finance Ministry’s monthly economic review, released on Monday.
In October, India’s retail inflation surged to 6.21 percent, reaching a 14-month high, primarily driven by elevated food prices, especially in select vegetables. Supply disruptions caused by heavy rains in key producing states exacerbated price pressures on essential items such as tomatoes, onions, and potatoes. Despite this, the review highlighted that prospects for agricultural production are promising, which should lead to a more manageable inflation outlook, even though certain food items may still face price pressures. Early trends in November indicated a moderation in key food prices, although geopolitical factors could continue to influence domestic inflation and supply chains.
The review also noted a rebound in India’s economic activity in October, following a period of softening during the monsoon months. High-frequency indicators showed growth in both rural and urban demand, as well as supply-side variables like the Purchasing Managers’ Index and E-way bill generation. The formal workforce is also expanding, with notable growth in manufacturing jobs and a significant inflow of youth into organized sectors.
Regarding India’s external sector, the report cautioned that export recovery might face challenges due to weakening demand in developed markets. However, trade in the services sector remains strong. The country’s economic stability and growth will also be influenced by global factors such as interest rate dynamics, earnings growth, geopolitical developments, and policy decisions in the US.
The report also pointed to concerns in the financial markets stemming from the ongoing Russia-Ukraine conflict, with safe-haven assets like US Treasuries and gold seeing increased demand. Geopolitical conditions remain fragile, and these uncertainties are likely to affect global economic trends moving forward.
