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High Food Prices May Soften With Good Kharif Harvest, Says Finance Ministry

A favourable monsoon may lead to good harvest, and moderate the impact on food inflation, the finance ministry says in a report.

A farmer transports a tractor trailer laden with onions at the Agriculture Produce Market Committee (APMC) wholesale market in Lasalgaon, Maharshtra, India, on Wednesday, Jan 23, 2019. Photographer: Dhiraj Singh/Bloomberg
A farmer transports a tractor trailer laden with onions at the Agriculture Produce Market Committee (APMC) wholesale market in Lasalgaon, Maharshtra, India, on Wednesday, Jan 23, 2019. Photographer: Dhiraj Singh/Bloomberg

Food prices may soften in the coming months amid prospects of a good kharif season harvest and reduced supply-side disruptions, according to the Ministry of Finance.

A favourable monsoon may lead to good harvest, and moderate the impact on food inflation, the ministry said in its monthly economic report, adding Covid-19-related supply disruptions, such as labour shortages and high transportation costs, “could continue to impose cost-push pressures”. The report said these risks are being mitigated by progressive easing of lockdowns and removal of restrictions on inter-state movements.

India’s retail inflation had jumped to its highest in eight months of 7.34% in September because of rising food prices. Consumer price index-based inflation stood at 6.69% in August. Soaring onion prices led the government to release one lakh tonne of buffer stock of the vegetable.

The pressure on prices of vegetables like tomatoes, onions and potatoes should also ebb by October-December, with the arrival of the kharif harvest, the report said.

The report also said that steady contraction of Covid-19 cases and low fatality rate has “instilled measured optimism in India that the worst is behind us”. Surge in economic activity is reflective of more “manageable” pandemic situation in India as compared to advanced economies, it said.

High frequency indicators in October point towards revival of economic activity through healthy kharif output, power consumption, rail freight, auto sales, vehicle registrations, highway toll collections, e-way bills, rebound in GST collections and record digital transactions, the ministry said.

Considering these indications of India’s GDP growth in the ongoing financial year being higher than projections made by various agencies, the fiscal space is set to widen to accommodate other priorities of the government, the report said.

“India stands poised to recover at a fast pace and reach pre-Covid-19 levels by the end of the year, barring the incidence of a second wave that may be triggered by the fatigue with social distancing,” it said.