The arrival of kharif crops in the market, coupled with a robust outlook for the rabi crop, bodes well for the food inflation outlook, economists said on Monday.
This positive sentiment comes as the wholesale price index (WPI) inflation eased to 1.9 percent in November, down from 2.4 percent in October.
The moderation in WPI inflation last month was primarily driven by a decline in food inflation.
“The arrival of fresh harvests has led to a seasonal correction in food prices,” said Rajani Sinha, Chief Economist at CareEdge Ratings.
“The outlook for agriculture remains positive, with good kharif production and conducive prospects for rabi sowing, thanks to healthy reservoir levels and good soil moisture from prolonged monsoons.”
Sinha added, “We expect WPI inflation to remain largely benign, averaging 2.3 percent in Q3 FY25 and around 2.5 percent for the full fiscal year.”
The WPI moderation was primarily led by a decline in primary food articles, which eased to a three-month low of 8.6 percent from 13.5 percent in the previous month. This exerted significant downward pressure on the headline inflation rate.
“Core (non-food manufacturing) WPI inflation inched up to 0.5 percent in November 2024 from 0.3 percent in October 2024, but remained below 1.0 percent for the fourth consecutive month,” noted Rahul Agrawal, Senior Economist at ICRA.
This easing in inflation is a welcome sign, especially since retail inflation crossed the RBI’s upper limit of 6 percent for the first time in October.
The central bank is waiting for retail inflation to stabilize at 4 percent before considering an interest rate cut to propel growth, which is widely anticipated early next year.
(With input from IANS)
