Food inflation falls to 13-month low to 5.42%

Favorable base, sequential decline in vegetable prices key reasons. Retail food inflation dropped sharply to a thirteen-month low to 5.42% in July, compared to 9.36% in June largely because of base effect, while prices of pulses and cereals prices continued to be at elevated levels. The consumer food price index (CFPI) rose by 2.81% sequentially in July, 2024. In July last year, the food inflation was high at 11.51%, sharply up 4.49% in the previous month. The chief driver of the downtrend was vegetable inflation, which declined quite sharply to 6.8% in July from 29.3% in the previous month, led by the favorable base. In month-on-month terms, however, vegetable prices shot up by 14.1% in July 2024, after having risen at a similar pace in June 2024.

Inflation in onion and potato were 60.54% and 65.64% respectively in July on year because of lower production. According to the agriculture ministry, output of potato and onion in the 2023-24 crop year (July-June) is projected at 56.76 million tons (MT) and 21.23 MT, a decrease of 6% and 20% respectively. Tomato prices declined 42.91% last month because high prices prevailed a year ago. Inflation in tomato in July 2023 was 202% on year when retail prices crossed Rs 100/kg across key cities because of disruption in supplies due to rains in hilly states. Deflation in edible oils continued in July, 2024.

Inflation in pulses rose to 14.77% in July compared to 16.07% June. The arhar variety of pulses reported the highest price rise of 22.52%. The price rise in gram split and moong were 20.55% and 7.56% respectively last month on year. The pulses prices are likely to decline because of robust kharif crops – tur, urad and moong sowing which currently at 11.74 million hectares, up 6.67% on year. Robust imports so far likely to keep prices down. Overall cereal inflation in July declined to 8.14% from 8.75% in June on year – driven by rise in rice and wheat prices. Inflation in wheat rose 6.95% last month from 6.67% in June. Retail rice prices rose by 10.89% last month, a decline from 12.15% in June. The Government has commenced open market sale of rice to bulk buyers from the surplus stock of Food Corporation of India at the subsidized rate of Rs 28/kg. The Government has banned exports of white rice and imposed 20% export duties on par-boiled rice to improve domestic supplies. Refined oil prices dropped by 4.79% last month on year while overall inflation in oils and fats category declined 1.17%. Inflation in the meat and fish category rose by 5.97% last month. Chicken prices rose by only 7.45% last month. Price rise in milk last month was only 2.99% on year. Inflation in spices continues to ease at 1.43% in July. Jeera prices declined by 18.5% on year.