Some relief is expected in food inflation. The Reserve Bank of India (RBI) bulletin released on Monday on the state of the economy said that the prices of grains, pulses and edible oil have softened on a large scale in August. The gross (headline) inflation, measured on the basis of annual change in the All India Consumer Price Index (CPI), came down to 3.5 percent in July last month from 5.1 percent in June. According to Bhasha news, the Reserve Bank’s August bulletin said that the reason for the 1.54 percent reduction in inflation rate is the favorable comparative base of 2.9 percent. This has had a positive impact of more than 1.4 percent.
Potato prices continue to rise
According to the news, the article written by the team led by Reserve Bank Deputy Governor Michael Debabrata Patra said that the data on the prices of food items so far (till 12) in the month of August shows that the prices of grains, pulses and edible oil have softened on a large scale. Among vegetables, the price of potatoes has remained high while the prices of onions and tomatoes have come down. In the bulletin – Is food prices affecting other sectors? The article titled, it is said that core inflation has been coming down since 2022-23. This is mainly due to monetary policy measures, stance and reduction in cost-based shocks. However, the rise in food prices in these years is putting reverse pressure on core inflation, but it is under control due to measures to reduce inflation under monetary policy.
Risk of increase in core and overall inflation
The article written by Patra, Joyce John and Ashish Thomas George says, should inflation-reducing measures be eased? Aggregate demand is increasing. Along with this, there is also a cost-based risk amid the ongoing global tension. In view of this, there is a risk of core and gross inflation increasing and it may go out of control. According to the authors, if the pressure on food prices persists and there is an impact on other sectors, then a cautious monetary policy approach is necessary. Traditionally, while considering monetary policy, it was believed that the rise in food prices is temporary, but now the situation is changing, in many cases food inflation has persisted for a long time.
Food inflation remains and it is a matter of concern
Even after the price rise, the demand for food items remains, due to which food inflation persists and this is a matter of concern. This can have an impact on the cost, service charges and the price of production. That is, the risk of food inflation has increased. It has been said that the source of the rise in food prices may be outside the scope of monetary policy, but when inflation spreads to other areas due to food inflation, then steps need to be taken under monetary policy to control it. This is necessary to maintain price stability and confidence. The central bank has clarified that the articles published in the bulletin are the views of the authors and they do not match the views of the Reserve Bank.
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