The short-term inflation outlook for India is benign, and the expectation of a normal monsoon and moderating global prices of key imported items give credence to the projections made by the RBI and IMF, the Economic Survey said on Monday.
However, to ensure long-term policy stability, the Survey 2023-24 suggested making focused efforts to increase the production of major oilseeds, expanding the area under pulses, and assess the progress in developing modern storage facilities for specific crops.
The progress in controlling prices
“Since 2020, countries have been facing challenges in controlling inflation. In FY23, Consumer Price Index (CPI) based retail inflation in India was primarily influenced by higher food inflation, while core inflation remained moderate. Externally, the Russia-Ukraine war led to price pressures, while domestically, excessive heat in the summer and uneven rainfall put pressure on food prices,” it said.
“However, since May 2022, monetary policy broadly focused on absorbing excess liquidity in the system by increasing the policy repo rate by 250 basis points from 4 per cent in May 2022 to 6.5 per cent in February 2023. Thereafter, the policy rate was kept unchanged by focusing on the gradual withdrawal of accommodation, aiming to align inflation with the target, while simultaneously fostering growth. Consequently, the persistent and sticky core inflation observed in FY23 declined to 3.1 per cent in June 2024,” the Economic Survey said.
What worked for the government
The Economic Survey 2023-24, tabled in Parliament by Finance Minister Nirmala Sitharaman, also suggested linking of price monitoring data for essential food items collected by different departments to help monitor and quantify the build-up of prices at each stage from the farm gate to the final consumer.
“The ongoing efforts to construct the producer price index for goods and services may be expedited to have a greater grasp of episodes of cost-push inflation,” said the Survey authored by a team of economists led by Chief Economic Adviser V Anantha Nageswaran.
It also prescribed expeditiously revising the consumer price index with fresh weights and item baskets.
India and the world
In 2023, India’s inflation rate was within its target range of 2 to 6 per cent. Compared to advanced economies like the USA, Germany, and France, India had one of the lowest deviations from its inflation target in the triennial average inflation from 2021-2023, the Survey said.
India successfully managed to keep retail inflation at 5.4 per cent in FY24, the lowest level since the Covid-19 pandemic period.
The Economic Survey said that “moderation in inflation was largely the result of prudent administrative measures and monetary policies implemented during the post-pandemic economic recovery phase. As per the recent data released by MoSPI, the retail inflation rate was 5.1 per cent in June 2024. In view of this, the following section examines the detailed trends and patterns in core and food inflation”.
Retail inflation in June rose to a four-month high of 5.1 per cent. Also, wholesale inflation stood at 3.36 per cent in the month on account of rise in prices of food articles, especially vegetables and manufactured items.
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Economic Survey 2024: Prices under control, short-term inflation outlook benign
