Food inflation in India is, at 8.6%, the lowest it has been in 18 months (since May 2009); it is also the first time in four months that it has ventured into single-digit territory. The reduction in the rate at which food prices have been increasing for the past two years is being attributed to more supplies.
Whatever the reason, it will make the job of the Indian central bank that much easier. Managing growth, soaring asset prices, the inflow of foreign funds looking for higher returns, and inflation isn’t an easy job and the Reserve Bank of India has coped manfully with the challenges.
With analysts expecting food prices to stay at the same level till the end of March (the end of India’s fiscal year), the central bank will have one less variable to worry about.
Another variable could still force its hand, but going purely by food inflation data, status quo seems in order.