A vendor stands besides sacks of potatoes and onions at his shop in Guwahati.
| Photo Credit: ANI
A slight downtick in food price inflation may have cooled retail inflation to a three-month low of 5.1% in January, but most economists don’t expect the pace of price rise faced by consumers to slip much further in the near term with prices of vegetables, cereals and pulses still elevated.
Consumer Food Price Inflation stood at 8.3% in January, a tad below the 9.5% mark of December, but still sharply above October’s 6.6% pace when retail inflation was at 4.87%.
Inflation “may not drop further from these [5.1%] levels in February, as per high frequency vegetables price data so far”, HSBC economists Aayushi Chaudhary and Pranjul Bhandari said in a note on Tuesday, noting that prices for vegetables and other food items have held firm through the first ten days of this month.
Cereals inflation may have cooled from 15 successive months of double-digit rise, but still remains high at 7.8%, India Ratings and Research economists Sunil Kumar Sinha and Paras Jasrai said. “… Higher food inflation continues to be a worry area for RBI because it has the potential of impacting the core inflation via wage-price spiral,” they noted, projecting retail inflation to remain around 4.9% in February and March.
Last week, RBI Governor Shaktikanta Das had cautioned that “recurring food price shocks could interrupt the ongoing disinflation process, with risks that it could lead to de-anchoring of inflation expectations and generalisation of price pressures.”
SBI group chief economic advisor Soumya Kanti Ghosh said that evolving food prices will determine domestic inflation and retail inflation is expected to remain slightly above 5% in the remaining two months of 2023-24. The Reserve Bank of India (RBI) has projected an average inflation of 5% for this quarter.
