Indian food inflation cooling off? How and how soon

So what's driving the change?

Food inflation in India has been marked by volatility over the last five years due to a combination of internal and external factors that have influenced both supply and demand dynamics. 

In this period, there have been significant fluctuations in prices of important food items such as vegetables, pulses, cereals, and edible oils that have directly impacted household budgets and the overall economy. 

Several key factors have driven this volatility among them erratic monsoon patterns, global market disruptions, government policy changes, and supply chain constraints; all of which contribute to the uneven trajectory of food inflation. 

However, current positive indications show that India’s food inflation may be finally cooling off. Recent indicators suggest that food inflation in India is likely to cool off in the near term, driven by a combination of improved supply conditions, favourable government interventions, and easing global commodity prices. 

The monsoons this year have remained normal, resulting into giving an upward trend for major crops such as rice pulses and vegetables leading to increased overall market supply. Better crop yields reduce the probable occurrence of supply shortages which are major reasons for price hikes. Here’s a deep dive into this crucial economic indicator which may impact India’s overall economic health, this fiscal.

In addition, these days Indian government has been releasing buffer stocks related to essential goods and restricting imports of certain food items like wheat or sugar to keep them available within its territory hence stabilising price shocks resulting from price volatility control measures taken by its authorities lately off late. 

Globally edible oils and cereals’ prices have also been softening as some supply chains disrupted by pandemics and geopolitical tensions start normalising themselves again. Lower import costs for these essential items contribute to the cooling of domestic food inflation. 

While short-term fluctuations are not ruled out, current trends point to a stable environment on food inflation that may favour both consumers and policymakers.