Kharif Crop Arrival and Promising Rabi Outlook Signal Positive Trends for Food Inflation
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New Delhi, Dec 16 (NationPress) The emergence of kharif crops in the market, combined with a strong projection for the rabi crop due to healthy sowing trends and high reservoir levels, bodes well for the outlook on food inflation, economists noted on Monday, as the wholesale price index (WPI) inflation dropped to 1.9 percent in November from 2.4 percent in October.
The decline in WPI inflation last month was mainly attributed to a reduction in food inflation.
According to CareEdge Ratings' Chief Economist Rajani Sinha, "The arrival of fresh harvests has resulted in a seasonal correction in food prices. The agricultural outlook is optimistic, with good kharif production. The conditions for rabi sowing are favorable, aided by healthy reservoir levels and adequate soil moisture from extended monsoon rains."
"We anticipate that the WPI inflation will remain largely stable, averaging 2.3 percent in Q3 FY25. For FY25, WPI inflation is projected to average around 2.5 percent," she added.
The moderation in WPI was primarily driven by primary food articles, which fell to a three-month low of 8.6 percent from 13.5 percent in the previous month, applying downward pressure on the headline figure by 91 bps between these months.
ICRA's senior economist Rahul Agrawal mentioned, "The core (non-food manufacturing) WPI inflation rose slightly to 0.5 percent in November 2024 from 0.3 percent in October 2024, while remaining below 1.0 percent for the fourth consecutive month."
The reduction in inflation is a positive indicator, especially since it was the first time retail inflation exceeded the RBI’s upper limit of 6 percent in October.
The central bank is waiting for retail inflation to stabilize at 4 percent on a durable basis before considering an interest rate cut to boost growth, which is anticipated to happen early next year.
