Outlook For Food Inflation Expected To Be Benign

RBI Governor Shaktikanta Das noted that the CPI inflation print of December at 2.2% continued to surprise on the downside. The overall food group continued to remain in deflation with the decline in food prices becoming more broad-based. Five constituents of the food group -vegetables, sugar, pulses, eggs and fruits -were in deflation in December, according to him, noted the minutes of the last RBI policy meeting. He stated further that the outlook for food inflation is expected to be benign in the backdrop of excess domestic supply conditions in many food items. The lower prices in the international markets in food items also limit the avenues for exports to address the domestic surplus. This will be an important factor in keeping the overall inflation low. Soft crude oil prices augur well for keeping the petroleum product inflation under check and this will help in containing the input costs for goods and services. Inflation expectations of households have declined significantly in the last round, which is a welcome development.

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