New Delhi, May 8 : India has effectively navigated the issue of food inflation, setting itself apart from other countries that continue to grapple with rising prices. In March of this year, India’s consumer food price index (CFPI) dropped to 4.79%, marking a decline from 5.95% in February and 7.68% in March 2022. This achievement is noteworthy, considering that inflation rates in the US and European nations have soared above their acceptable thresholds, driven by efforts to revive their economies post-COVID-19 and the complexities arising from the Russia-Ukraine conflict.
According to data shared by the World of Statistics on Twitter, the US, UK, and Euro Area are currently facing food inflation rates of 8.5%, 19.1%, and 17.5%, respectively. In contrast, India’s food inflation stands at less than five percent, placing it among the six countries with the lowest rates. Other nations, such as Lebanon, Venezuela, Argentina, and Zimbabwe, are grappling with substantially higher food inflation rates of 352%, 158%, 110%, and 102%, respectively.
Professor Shamika Ravi, a member of the Prime Minister’s Economic Advisory Council, commended India’s achievement in a tweet, stating, “Well done India – for managing food inflation very well (at such difficult global times!).” She shared the food inflation data published by ‘World of Statistics,’ which presents figures from various countries.
To mitigate the impact of the Ukraine conflict on both India’s food security and the needs of neighboring and vulnerable nations, the government amended the export policy for wheat last year, categorizing its export as “prohibited.” This measure remains in effect, as global wheat prices have exhibited significant volatility due to the prominent roles of Ukraine and Russia as major wheat suppliers. Additionally, heat waves before the rabi harvest last year adversely affected wheat crops in several growing regions of India.
In terms of energy security, India has imported discounted crude oil offered by Russia. The Reserve Bank of India (RBI) has also taken necessary policy actions to counter inflationary pressures and support economic growth. During its first monetary policy review meeting in 2023-24, the RBI opted to keep the key benchmark interest rate, known as the repo rate, unchanged at 6.5%. This decision aims to assess the impact of the previous rate tightening measures on various macroeconomic indicators. Since May 2022, the RBI has raised the repo rate by a cumulative 250 basis points as part of its efforts to combat inflation.
India’s headline consumer price index-based (CPI) inflation, or retail inflation, has gradually declined from its peak of 7.8% in April 2022 to 5.7% in March 2023. After three consecutive quarters of surpassing the RBI’s 6% target, retail inflation finally returned to the central bank’s comfort zone in November 2022. Raising interest rates is a monetary policy tool typically employed to curb demand in the economy, thereby aiding the decline of inflation.
The RBI projects that assuming an average crude oil price of USD 85 per barrel and a normal monsoon, India’s CPI inflation will moderate to 5.2% for the fiscal year 2023-24. Quarterly estimates stand at 5.1% for Q1, 5.4% for Q2, 5.4% for Q3, and 5.2% for Q4. However, the Ministry of Finance cautions that constrained supplies of milk and wheat, coupled with volatility in the international crude oil market due to OPEC+ countries’ decision to reduce production from May 2023, may impact India’s inflation outlook moving forward.
