Food inflation has been a concern for many countries, including advanced economies, but India has managed to steer its inflation trajectory “very well”.

The consumer food price index (CFPI) in India moderated to 4.79 per cent in March this year, down from 5.95 per cent in February and 7.68 per cent in March 2022. This is at a time when the inflation figures in the US and European countries have been hovering way above their tolerance range as the countries try to revive their economies after the turmoil caused by COVID-19 and amid difficult global conditions in the wake of the Russia-Ukraine war.

In the US, the UK, and Euro Area, the food inflation is 8.5 per cent, 19.1 per cent, and 17.5 per cent, data put out by the World of Statistics on its Twitter handle showed.

Countries like Lebanon, Venezuela, Argentina, and Zimbabwe are facing food inflation at 352 per cent, 158 per cent, 110 per cent, and 102 per cent respectively.

“Well done India – for managing food inflation very well (at such difficult global times!),” said Prof Shamika Ravi, a member of the Prime Minister’s Economic Advisory Council, in a tweet.

She attached the food inflation data tweeted by ‘World of Statistics’ which lists figures from various countries.

India is among the six countries towards the bottom half of the list whose food inflation is less than five per cent.

The government has taken steps to keep food inflation under check.

To manage the overall food security of the country as well as meet the needs of the neighbouring and other vulnerable countries amid the Ukraine war, India last year amended the export policy of wheat by putting its export under the “prohibited” category, which is still in force.

Global wheat prices have shown substantial volatility in the past year as both Ukraine and Russia are major suppliers of wheat.

Heat waves in several wheat-growing regions in India before the rabi harvest last year affected crops. Wheat pods in the mature stage typically shrink if overexposed to heat.

For energy security, India has imported discounted crude oil offered by Russia.
RBI has also been engaged in necessary policy actions to counter inflationary pressures and support growth.

The Reserve Bank of India, in its first monetary policy review meeting in 2023-24, decided to keep the key benchmark interest rate — the repo rate — unchanged at 6.5 per cent, to assess the effects of the policy rate tightening done so far on various macroeconomic parameters.

Barring the recent pause, RBI has so far raised the repo rate, the rate at which it lends to banks, by 250 basis points cumulatively since May 2022 in the fight against inflation.

In India, headline consumer price index-based (CPI) inflation (or retail inflation) has gradually declined from its peak of 7.8 per cent in April 2022 to 5.7 per cent in March 2023. India’s retail inflation was above RBI’s 6 per cent target for three consecutive quarters and managed to fall back to the RBI’s comfort zone only in November 2022.

Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline and vice versa.

Assuming an annual average crude oil price (Indian basket) of USD 85 per barrel and a normal monsoon, CPI (or retail) inflation is projected to moderate to 5.2 per cent for 2023-24 in India as estimated by RBI in its April monetary policy meeting; with Q1 at 5.1 per cent; Q2 at 5.4 per cent; Q3 at 5.4 per cent; and Q4 at 5.2 per cent.

Ministry of Finance has, however, noted that constrained supplies of milk and wheat, coupled with a volatile international crude oil market with OPEC+ countries deciding to cut crude oil production from May 2023 are factors that may, going forward, influence the inflation outlook in India.

For wheat, there were reports from various key growing states that unseasonal rains have flattened standing crops in some regions. Wheat, a rabi crop, was in an advanced maturing stage and was expected to hit mandis in a fortnight or so.

Milk inflation in India has remained elevated for several months due to a growing supply-demand mismatch. Milk production has been impacted by a Lumpy Skin Disease (LSD) infecting millions of cattle in late 2022. The price also rose because of high fodder and transportation costs.