Amid the continuous drop in vegetable prices, India’s headline retail inflation is anticipated to decline in September 2023, the Reserve Bank of India (RBI) said in its state of the economy report.
The report stated that within key vegetables, tomato prices continued their precipitous fall as fresh harvest arrivals strengthened and logistics improved during the monsoon break phase. Onion prices started moving upward owing to seasonal shortages during July-August and storage losses in rabi crops following unseasonal rains during the pre-monsoon phase in Maharashtra and Karnataka.
“Providing a somewhat silver lining to domestic developments, headline inflation softened in August from the peak it had reached a month ago. As in the case of the upswing, the ebbing was driven by reversal in the prices of vegetables,” the article reported.
Food inflation (Y-O-Y) decreased to 9.2% in August from 10.6% in July as a favourable base effect fueled the downward trend. Vegetable inflation was high but substantially decreased in terms of subgroups. Cereals, milk, pulses, and prepared foods all had a slight decline in inflation, but spices, fruits, eggs, meat, and fish saw a slight increase. Deflation in edible oils persisted, albeit at a slower rate.
On the demand front, private final consumption expenditure, which accounts for 57.3% of GDP and is the primary driver of aggregate demand, had a gain of 6.0%. Despite a rise since May 2023, supply chain pressures in India remain below historical average levels. It also stated that economic activity index (EAI) currently projects a GDP growth of 6.6% for the second quarter of 2023–2024.