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Food Inflation in India

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Decline in Inflation Rates

  • Overall CPI-based inflation fell to 3.61% in February, the lowest since July last year.
  • Food inflation dropped to 3.75%, the lowest since May 2023.
  • The decline follows a peak of 10.87% in October 2023, which had complicated RBI’s monetary policy.

Increased Agricultural Output

  • Kharif food grain production rose by 7.9%; rabi production by 6%.
  • Record output projected for rice, wheat, maize, and pulses like millet, tur, and gram.
  • Oilseeds production grew by 21% in kharif and 2% in rabi.
  • Horticultural crops production estimated at 362.09 million tonnes, a 2.07% increase from 2023-24.
  • Agriculture & allied activities expected to grow by 4.6% in FY25, up from 2.7% in FY24.

Policy Implications

  • RBI projects retail inflation at 4.2% in FY26, down from 4.8% in FY25.
  • Food inflation averaged 8.4% in 2024, significantly impacting household consumption.
  • Higher agricultural output could boost overall economic growth and demand.

Long-Term Agricultural Challenges

  • Extreme weather & climate change remain key risks.
  • High price disparities between farm gate and consumer prices.
  • Storage & logistics issues lead to crop spoilage.
  • Poor rural infrastructure affects supply chain efficiency.

The Road Ahead

  • Investment in agricultural supply chains is crucial to reducing long-term food price volatility.
  • Policy measures should address market access, storage facilities, and rural connectivity.
  • While inflation control is positive, long-term agricultural resilience remains a priority.

The decline in food inflation, driven by strong agricultural output, is a positive development for India’s economy. However, structural reforms are necessary to sustain this trend and mitigate future risks.

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