As food prices continue to slide, retail inflation based on Consumer Price Index (CPI) is likely to have dropped further to around 4 per cent in February. The government will make the data public on Wednesday.
Retail inflation was 4.3 per cent in January, which was the lowest in five months. If rates come down below 4 per cent, it would be for the first time after August when headline number comes down below the median of targeted inflation range of 4 per cent. Also, this is a big factor for consideration by the Monetary Policy Committee in deciding on another policy rate cut. In February, for the first time in five years, the committee lowered the policy rate by 25 basis points.
Record wheat output
Another positive factor is the record production of 115.43 million tonnes (mt) of wheat this year. This is higher than its own target of 115 mt and up from 113.29 mt – also a record – in the 2023-24 crop year (July-June). Last week, the roller flour millers’ federation pegged the wheat output at 110 mt, also higher than its own estimate last year.
On Monday, the Ministry of Agriculture released the official estimates of crops grown during winter season of 2024-25. It projected India’s rapeseed/mustard production at 12.87 mt, gram (chana) at 11.54 mt, lentil (masur) at 1.82 mt and rice 15.76 mt. All these are likely to push inflation down this year.
In a note Nomura said as vegetable prices are cooling, headline is converging towards core. “Inflation is tracking lower at 4 per cent in February and 4.1 per cent in Q1 2025. We see it averaging 4.2 per cent in FY26, down from the 4.7 per cent we expect in FY25.”
Further, weak domestic demand, higher crop output and muted manufacturing costs are likely to offset upside risks from a weak currency.
Another agency, Crisil, said in a report that on year-on-year basis, tomato price declined by 28 per cent, onion saw a rise of 11 per cent and potato by 18 per cent. This means there was a mixed trend.
Minister of State for Consumer Affairs, Food and Public Distribution, B L Verma told the Rajya Sabha that a part of the stock of pulses from the buffer are converted to dals for retail sale to the consumers at affordable prices under the Bharat Dal brand. Similarly, atta and rice are distributed to retail consumers under Bharat brand at subsidised prices. Onions from the buffer were distributed among retail consumers at ₹35 per kg through stationary retail outlets and mobile vans in major consumption centres.
According to Verma, these measures to improve supply chain infrastructure helped in making essential food commodities such as pulses, rice, atta and onion available to the general consumers at affordable prices.
“The overall food inflation rate had declined to 6.02 per cent in January 2025 from 10.87 per cent in October 2024,” he said.