Food Costs in India Set to Drop Below 5% – Lowest in Months, says Union Bank of India Report

New Delhi:  Finally, some relief at the grocery store! It looks like the bite of rising food prices in India is easing, with a new report predicting food inflation will dip below 5% for the first time since last summer! That’s according to economists at Union Bank of India, who just crunched the numbers.

The report says that overall prices across the board are also cooling down. They expect India’s main measure of inflation, called the retail inflation rate, to fall under 4% in February. Why the good news? Mostly because vegetable prices have taken a tumble.

“We think food costs have likely gone down below 5% for the first time since June of last year,” the report stated. That’s a significant drop.

They estimate that the Consumer Price Index – that’s the main way we track inflation – will show a rate of just 3.94% for February. That’s down from 4.31% in January. The big reason? Cheaper veggies, especially the ones we use every day like onions, potatoes, and tomatoes.

Food prices make up a big chunk of overall inflation, so when they go down, it makes a real difference. The report thinks food inflation specifically fell to 4.66% in February. If this is right, it’s the first time since June 2023 that food price increases have been under 5%.

For the last four months, month-to-month food prices have actually been falling. This is pretty normal in the winter when vegetable harvests are good and prices naturally come down.

You can really see this in vegetable prices themselves. In January, vegetable inflation was over 11%! But in February, it plunged to under 4%. The report mentions that prices for vegetables and pulses (like lentils and beans) kept going down throughout February.

Why is this happening? The report points to two main things: A good harvest of summer crops (called ‘kharif’ crops) and the usual winter drop in vegetable prices.

However, it’s not all good news on the price front. The report notes that prices for cooking oils and sugar actually went up during the same period.

Looking at other types of inflation, “core” inflation – which takes out food and fuel prices to get a clearer picture of underlying price pressures – actually nudged up slightly to 3.87% in February. This was mainly because gold prices have been rising. On the plus side, fuel prices are still falling, which helps to balance things out a bit.

Overall, the message is that India’s inflation seems to be heading downwards, which is good news for everyone. Lower inflation means things become a little more affordable. But the report also cautions that things can change quickly. Global prices for things like oil and how well India’s food supply system works will still play a big role in where inflation goes from here.

So, while it’s not a victory lap just yet, this report offers a welcome sign that those rising price pressures might finally be starting to ease.