Home / Industry / Agriculture /  Surplus but uneven rainfall lends upward risks to food inflation


While overall monsoon rains exceeded expectations, erratic rainfall across India increased the upside risks to food inflation, said QuantEco Research. Consumer price index-based inflation is estimated at 6.7% in 2022-23, it added.

The Southwest monsoon in India during June-September ended with a 6% surplus compared to the long-period average, to beat India Meteorological Department’s estimates of 3% surplus. But, the QuantEco Rainfall Index, based on yields in foodgrain in top agricultural states, was in deficit throughout the monsoon season.

It said notwithstanding the moderation in international food prices, risks to domestic food inflation remain elevated on the back of low Kharif output, festive demand, decline in acreage for pulses, and intense rainfall in some states.

“For now, we hold on to our FY23 CPI inflation forecast of 6.7%. The possible upside in food inflation could get offset by the downside in non-agri commodity prices, especially if crude price remains sub-$90 per barrel levels; considering the escalating downside risks to global growth," QuantEco said in its report.

The late withdrawal of monsoons, along with high levels of water in reservoirs (up 111% from last year as of end-September) and the continuing La Nina conditions in the Pacific augur well for 2022-23 Rabi sowing and output.

“This could perhaps break the weather jinx weighing on output in last three consecutive seasons and, more importantly, arrest the trend of rising domestic price of cereals."

India’s retail inflation has been hovering at record levels of 7%, far above the Reserve Bank of India’s tolerance range of 4-6% for eight consecutive months, largely led by higher food prices and pressure from rising global oil and commodity prices.

RBI has also retained inflation projection at 6.7% for the current financial year in its latest policy meet, estimating it at 6.5% for the third quarter, and 5.8% in January-March 2023. The RBI- led monetary policy committee hiked the repo rate by 50 basis points for the fourth time in a row on 30 September, taking the policy rate to a three-year high of 5.9%.


Dilasha Seth

" Dilasha Seth is a journalist reporting on macroeconomic policy for the last 11 years. She writes extensively on issues including international trade, macroeconomic data, fiscal policy, and taxation. At Mint, she reports on trade deals that India is signing besides key policy decisions of the Ministry of Finance. She closely tracked and covered the transition to the goods and services tax (GST) regime in 2017 and also writes on direct tax-related issues. In the past, she has worked with Business Standard and The Economic Times. She is based in Bangalore."
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