Reserve Bank of India Governor Shaktikanta Das expressed that vegetable prices in India are hoped to decrease from September, potentially reducing the current wave in retail inflation, which surpassed 7.44% in July, the highest in 15 months.
“We expect to see an appreciable slowdown in vegetable inflation from September,” Das said and for cereal prices specifically, summed up, “The outlook looks bright even though geopolitical tensions could hamper food prices”
Das cited that despite higher core inflation, its contemporary gradual decline reflects effective monetary policy transmission. “The central bank would be on guard to ensure that inflation does not remain persistent and get generalised across segments”
The frequent incidences of recurring food price shocks pose an inflation expectation, which has been underway since September 2022. We will remain watchful of this,” Das said.
On the rupee, the central bank chief repeated that the RBI has no specific mark but would proceed with building its foreign exchange reserves to help manage any dollar outflows.
“The Reserve Bank has also made conscious efforts to improve systemic resilience and efficiency by maintaining external stability and building forex reserves,” he said.
India has raised rates by a total of 250 basis points since May 2022 to tame rising prices. The central bank remains firmly focused on aligning inflation to the Monetary Policy Committee’s mandated medium-term target of 4%, Das said.
Vegetable price inflation is likely to decline from September
The decline in vegetable price inflation will be due to a number of factors, including:
- The onset of the monsoon season, which will lead to increased production of vegetables.
- The government’s efforts to improve the supply chain of vegetables.
- The easing of global supply constraints.
Here are some additional details from the statement:
- Das said that the RBI expects to see an “appreciable slowdown” in vegetable inflation from September.
- He attributed the decline to the onset of the monsoon season, which will lead to increased production of vegetables.
- Das also said that the government is taking steps to improve the supply chain of vegetables, which will help to keep prices in check.
- He added that the easing of global supply constraints will also help to moderate vegetable prices.
The statement by Das is a positive development for consumers in India. Vegetable prices have been rising sharply in recent months, putting a strain on household budgets. The decline in vegetable price inflation from September will provide some relief to consumers.
On a similar note, a finance ministry official said that the government hopes vegetable prices to commence cooling off from next month with the outset of new crops in the market, but rising crude oil prices are a consideration even though it is still within tolerable zone of USD 90 a barre
The official further said that a reduction in excise duty is not on the cards. The government is driving infrastructure investment, and private sector capital investment is yet to gather steam.
He further said, as cited by PTI, that the Centre’s capital expenditure which was 28 percent of Budget estimates at the end of the June quarter, will reach 50 per cent by September end. In the 2023-24 budget, the government had hiked capital investment outlay by 33 per cent to ₹10 lakh crore in the current fiscal.
The official further said that a 6 per cent rainfall deficit is improbable to affect kharif sowing as the agriculture sector is resilient. The government has been taking steps to control inflation, including releasing wheat and rice stocks from reserves, putting regulations on exports of rice, and sugar, and permitting the import of pulses and oilseeds
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