Monsoon rainfall boost in August likely to ease pressure on food inflation

livemint.com:

spatial distribution has led to higher acreage under Kharif, or summer, crops compared to last year, and reservoir levels have also risen, all of which bode well for curbing elevated and sticky food prices. Remember, adverse weather conditions had led to a month-on-month (m-o-m) spike in vegetable prices over the past two months. However, in July, inflation measured by the headline consumer price index eased to 3.54%, with food inflation falling to 5.1%, though this was largely due to a favourable base.

Read this | Mint Primer: Ever seen the rain? The price of a truant monsoon Nonetheless, the improved spatial distribution is reflected in higher Kharif sowing than last year. Plus, reservoir levels have risen. All these factors bode well to tame elevated and sticky food prices.

Remember, adverse weather conditions led to a month-on-month (m-o-m) spike in vegetable prices in the previous two months. It is worth noting here that in July, inflation measured via the headline consumer price index eased to 3.54% and food inflation fell to 5.1%, however this was largely aided by a favourable base. But the good news is that, in August the rise in vegetable supplies is beginning to have an impact on prices which are tracking lower by 10% m-o-m, said the IDFC First Bank report dated 29 August.

"Pulses and cereals which tend to see more persistent price pressures are seeing some m-o-m improvement with a reduction in prices by 1.1% and 1.7%, respectively," added the report. Meanwhile, in its August policy meeting, the Reserve Bank of India maintained status quo with the repo rate unchanged at 6.5%. The minutes of this meeting pointed to concerns emerging on food price shocks adding to persistent food inflation pressures.