India's Inflation Outlook: Stability Positive but Long-Term Vigilance Needed

The Economic Survey 2023-24 reports a short-term benign inflation outlook for India, supported by expectations of a normal monsoon and moderating global prices. For long-term stability, it suggests increasing oilseed production, expanding pulses area, and developing modern storage facilities. The survey emphasizes linking price monitoring data and revising consumer price index weights.

The short-term inflation outlook for India appears favorable, buoyed by expectations of a normal monsoon and moderating global prices of key imports, according to the Economic Survey released on Monday.

However, for long-term policy stability, the Survey 2023-24 highlights the need for focused efforts to boost the production of major oilseeds, expand the area under pulses cultivation, and evaluate the development of modern storage facilities for specific crops.

Tabled in Parliament by Finance Minister Nirmala Sitharaman, the Economic Survey 2023-24 also recommended integrating price monitoring data for essential food items from various departments to monitor and quantify price increases from the farm to the consumer.

'The ongoing efforts to construct the producer price index for goods and services need to be expedited to better understand cost-push inflation episodes,' stated the Survey, authored by economists led by Chief Economic Adviser V Anantha Nageswaran.

The Survey also suggested prompt revisions to the consumer price index with updated weights and item baskets. In 2023, India's inflation rate remained within its target range of 2 to 6 percent. Compared to advanced economies such as the USA, Germany, and France, India experienced one of the lowest deviations from its inflation target during the 2021-2023 period. India's retail inflation was managed at 5.4 percent in FY24, the lowest since the Covid-19 pandemic.

Despite this, retail inflation in June rose to a four-month high of 5.1 percent, with wholesale inflation at 3.36 percent due to rising prices of food articles, especially vegetables, and manufactured items.

(With inputs from agencies.)