February Economic Review: Promising Summer Sowing Raises Hope For Lower Food Prices

The Ministry of Finance on Friday suggested that India's inflation outlook for the upcoming months is positive, with the pick-up in summer sowing likely to reduce food prices.

In its February monthly economic review, the ministry's Economic Affairs Department noted that the outlook for food inflation has improved over the past couple of months. The area sown for summer crops stand at 39.4 lakh hectares, as of March 15—up 7.3% as compared with the previous year, kicking off the sowing of summer crops on a positive note.

"There is a modest increase in overall acreage in rabi sowing compared to the previous year," the review said. According to its second advance estimates of FY24, wheat production could increase 1.3%, while kharif rice production could rise 0.9% over the previous year. Tur production is estimated to gain by 0.8%. This will help in reducing inflationary pressure in major food items, it said.

India’s February consumer price index inflation was steady at 5.1%, a fraction lower than that in January, driven by a rise in prices of vegetables which increased food prices.

The government's economic unit said that inflation in February moderated mildly in all groups in the core CPI basket, including clothing, footwear, housing, household goods and services, health, transport and communication, recreation and amusement, education and personal care.

The month also recorded a fall in inflation in cereals, milk, fruits, spices, pulses, non-alcoholic beverages and prepared meals, snacks and sweets as compared with January.

Core inflation, which excludes food and energy prices, also moderated in February, slipping below the 4% mark.

The declining trend in core inflation implies a broad-based moderation in price pressure, the review said, adding that declining global commodity prices are also reflected in the moderation in domestic core inflation.

Core inflation declined from 6.1% in FY23 to 4.4% in FY24 (April-February).