Food Inflation Likely to Ease With...: Finance Ministry's October 2024 Outlook - Insights

Food inflation in India is expected to ease in the coming months, following a bumper Kharif crop in 2024-25, the monthly economic report by the finance ministry on Monday showed.  According to the First Advance Estimates, the production of major Kharif crops has reached a record 164.7 million tonnes, reflecting a 5.7 per cent increase over the previous year and an 8.2 per cent rise compared to the five-year average. This robust harvest is expected to ease pressure on food prices, particularly in rice, maize, coarse grains, and oilseeds, which have seen higher yields this season.

Pulses Output Affected by Excessive Rainfall

While most crops have performed well, pulses production has taken a slight hit due to excessive rains in key growing areas, resulting in lower yield estimates. Despite this, the government has raised Minimum Support Prices (MSPs) for both Kharif and Rabi crops, which will help support farmers’ income and encourage crop diversification.

Higher MSPs to Strengthen Rural Economy
The government’s decision to increase MSPs for Kharif crops by 1.4 per cent to 12.7 per cent, and for Rabi crops by 2.4 per cent to 7 per cent, is expected to benefit farmers and further boost the rural economy. As of November 6, 2024, the government had procured 161 lakh metric tonnes of paddy, aiding nearly 15 lakh farmers. This record food grain production, along with the increased MSPs, will provide further economic support to rural areas.

Positive Outlook for Rabi Sowing
The outlook for the Rabi season is promising, with adequate availability of key inputs for sowing. The availability of quality seeds surpasses the required amount by 30.9 lakh quintals, ensuring sufficient supply. Fertilizer availability remains stable, although Di-Ammonium Phosphate (DAP) has faced some logistical delays. Additionally, reservoir water levels are higher than last year, ensuring ample irrigation for crops.
Tractor Sales Surge as Rural Outlook Improves

In line with the positive agricultural outlook, tractor sales in October 2024 reached a historic high, showing a double-digit year-on-year growth. This surge is attributed to favourable conditions, including a healthy monsoon, bumper harvest, and higher MSPs for Rabi crops.

Edible Oils and Vegetables to Shape Inflation Trends
While food inflation looks set to moderate, the trajectory will still be influenced by the prices of edible oils, tomatoes, onions, and potatoes. Early trends in November suggest lower inflation in vegetables, particularly tomatoes and onions. However, rising international edible oil prices may lead to higher domestic prices, potentially affecting inflation in the coming months.