India's Food Inflation Outlook Brightens Amidst Record Wheat and Pulses Production

India's food inflation outlook improves as recent vegetable price corrections and record wheat and pulses production set the stage for a durable softening in inflation. The RBI also projects Consumer Price Index inflation for 2025-26 at 4.0%, while the policy repo rate has been reduced to support growth.

The Reserve Bank of India (RBI) has issued a positive outlook for food inflation, buoyed by a substantial correction in vegetable prices and projections of record wheat and pulses production. According to the minutes from the latest RBI monetary policy meeting, there has been a notable seasonal decrease in vegetable prices, improving the inflation landscape.

Clarity around Rabi crops and record wheat production, alongside increased yields of key pulses, promise a sustained reduction in food inflation. "With robust kharif arrivals, the conditions are ripe for a durable softening of food inflation," the RBI minutes read, noting a marked decline in inflation expectations for the forthcoming quarters.

Further easing of inflation pressures is anticipated due to declining crude oil prices. Despite lingering global market uncertainties and potential weather-related supply disruptions posing risks, Consumer Price Index inflation for 2025-26 is forecast at 4.0%, assuming normal monsoon conditions, with quarterly estimates ranging between 3.6% and 4.4%.

On a broader economic front, financial markets have reacted with a decrease in the dollar index and equity sell-offs, while bond yields and crude oil prices have softened significantly. The RBI has adjusted its growth forecast for 2025-26 slightly downward to 6.5%, citing trade-related uncertainties following US-imposed tariffs.

The National Statistics Office has projected real GDP growth at 6.5% for 2024-25, building on a robust 9.2% in the previous fiscal year. The recent Monetary Policy Committee meeting, held under the leadership of RBI Governor Sanjay Malhotra, resulted in a unanimous decision to lower the repo rate by 25 basis points to 6.00% to meet its medium-term consumer price index inflation target and support economic growth.

The RBI usually conducts six bimonthly meetings each fiscal year to discuss interest rates, money supply, and macroeconomic indicators, with the next sessions scheduled throughout the year. The committee consists of six members, including three from the RBI and three appointed by the government.

(With inputs from agencies.)