Food price volatility still a contingent risk: RBI officials

Last Updated23/09/2024

Food price volatility remains a contingent risk though Consumer Price Index (CPI) inflation came in below the Reserve Bank’s target for the second consecutive month in August

According to the Reserve Bank of India (RBI), despite a second consecutive month of Consumer Price Index (CPI) inflation below the target, food price volatility remains a contingent risk.
In an article in the RBI Bulletin for September, Deputy Governor Michael D. Patra and other officials highlighted the persistent risks in food prices. Food inflation increased from 5.1% in July to 5.3% in August due to an unfavorable base effect of 52 basis points (bps) outweighing a negative momentum of 30 bps.

High-frequency data from September shows a moderation in prices for cereals (particularly rice) and pulses, except for gram. Among vegetables, prices for potatoes and tomatoes declined, while onion prices increased. Edible oil prices remained stable.

Inflation in eggs, fruits, vegetables, and non-alcoholic beverages picked up.
Inflation softened in cereals, meat, fish, pulses, and sugar.
Edible oils and fats saw a lower deflation rate, while deflation deepened in spices.
Milk prices remained stable at a modest 3% inflation for the third month.

Fuel and light registered a deflation of 5.3% in August, driven by a 24.6% decline in LPG prices.
Other items in the fuel group experienced positive inflation.

Headline inflation edged up to 3.7% in August from 3.6% in July, largely due to an unfavorable base effect of about 5 bps. Core inflation moderated slightly to 3.3% from 3.4% in the same period.

Inflation increased in transport, communication, education, recreation, and household goods.
Inflation remained steady for clothing, footwear, housing, and health.
Personal care and intoxicants recorded moderated inflation.