What they mean for India's food economy and inflation this fiscal

Key messages

• Factors other than the monsoon have been increasingly shaping food inflation. These include extreme weather events, domestic policy and geopolitical developments. Food inflation can be high even when the monsoon is normal. A case in point is the 6%+ print in three of the past four normal monsoon years

• Uneven monsoon and El Nino are seen as key risks to food inflation this fiscal.
  
  • The current risk emanates from excess rain-led damage to vegetables and crops in the wellirrigated north and west India
    
  • The prices of cereals, pulses and, in the nearterm, vegetables, remain a key monitorable. Cereals inflation has been sticky in double digits over the past six months. Looking at the current production trends, pulses are in a vulnerable position.
    
  • El Niño’s impact has not been visible till now, and past data shows not all El Niño years are associated with high food inflation. However, it is a global risk that could hit international production and prices of commodities such as rice and edible oils
    
• The concern on food inflation is evident in the pre-emptive steps the government is taking, such as banning some types of rice exports, imposing stocking limits on wheat, and market intervention to improve supplies