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By Mahek | Published on March 14, 2025

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Businesss / March 14, 2025

Food Inflation Likely To Remain Benign For Next Few Months

As per the data from MoSPI, vegetable inflation, which had been a significant contributor to the overall inflation, slipped into deflation (at -1.1 per cent).

 New Delhi:

According to a report by Care Ratings, inflation in the food and beverages category moderated to 3.8 per cent in February, the lowest since May 2023. As per Ministry of Statistics and Programme Implementation (MoSPI) data, vegetable inflation, which had been a significant contributor to the overall inflation, slipped into deflation (at -1.1 per cent), reversing the trend of high inflation seen in the past months.

The CPI inflation moderated to 3.6 per cent in February, marking the lowest level in last seven months, backed by sustained easing in food and beverages. However, core inflation increased marginally to 4 per cent in February from 3.8 per cent last month.

The report suggests that agricultural production was at a record high in 2024-25 as per the Second Advance Estimate. With encouraging prospects for agricultural output, the arrival of fresh Rabi harvests and comfortable reservoir levels are some positive points for food inflation. However, it is essential to note that inflation in the edible oils category increased to 16.4 per cent in February, remaining in double digits for the past four months.

The key items that saw the lowest year-on-year inflation in February are ginger (-35.81 per cent), jeera (-28.77 per cent), tomato (-28.51 per cent), cauliflower (-21.19 per cent) and garlic (-20.32 per cent). The top five items which showed the highest year-on-year inflation are coconut oil (54.48 per cent), coconut (41.61 per cent), gold (35.56 per cent), silver (30.89 per cent) and onion (30.42 per cent).

Care Rating says edible oil prices continue to be a crucial factor to monitor, particularly given the contraction in the sowing of oil seeds and the rise in global edible oil prices. Moreover, our dependence on imports for edible oils raises concerns about persistently high inflation in this category. Food inflation is likely to remain benign in the coming months, however, we need to be cautious of any weather-related disruptions, it added.

According to Rajani Sinha, chief economist of CareEdge, CPI inflation eased to 3.6 per cent in February 2025, the lowest in seven months, driven by a sharp decline in food and beverage prices. Vegetable inflation turned negative at -1.1 per cent, and pulse inflation dropped to -0.4per cent, reversing the previous month's rise. However, double-digit inflation in edible oils and fruits limited further food inflation moderation.

Kerala (7.31 per cent), Chhattisgarh (4.89 per cent), Bihar (4.47 per cent), Karnataka (4.49 per cent), Haryana (4.27 per cent), Jammu & Kashmir (4.28 per cent), Assam (4.2 per cent), Tamil Nadu (4.05 per cent), Uttarakhand (4.02 per cent)

"Looking ahead, we expect inflation to stabilise around 4 per cent, supported by stable core inflation and easing food prices. Global commodity price movements, influenced by trade policies and geopolitical risks, remain a key concern. On the monetary policy front, weak growth and easing inflation may prompt a 25-basis point rate cut in the April MPC meeting, with a potential total reduction of 25-50 bps in FY26, depending on economic conditions," she added.

Aditi Nayar, chief economist at ICRA, believes that the sequential uptick in vegetable inflation in March is likely to prevent a further softening in the food and beverages inflation print in the month, after the substantial cooling seen over the past four months. This would push up the CPI inflation print mildly to 3.9-4 per cent in the next month. Overall, the CPI inflation is now expected to average at 3.9 per cent in Q4 FY2025, well below the MPC's projection of 4.4 per cent.

"The February CPI inflation, falling well below 4 per cent, has cemented the expectation of a back-to-back 25 bps rate cut in the MPC meeting, scheduled to be held in April. This may be followed by another 25 bps repo rate cut either in the June or August meetings, dependent in large part on the next GDP growth figures for Q4. Nevertheless, we are apprehensive that tight liquidity conditions may delay transmission of policy rate cuts to bank deposit and lending rates," she added.

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