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Food inflation likely to moderate with unlock and good monsoon: Subramanian
Jun-25-2021

Attributing the rise in food prices to restrictions imposed by several states during April-May to deal with the second wave of Covid-19, Chief Economic Adviser (CEA) K V Subramanian has said food inflation is likely to moderate on account of the twin impact of opening up of economic activities and good monsoon. Moreover, he asserted that high food inflation has not impacted a large section of population as they are being given free ration under the Pradhan Mantri Garib Kalyan Yojana.

He said ‘Some of the increase in food inflation in the recent print has been because of the restrictions that have been placed...we even saw last year when the lockdown happened and the supply side was affected, impacting food inflation, which in turn then led to an impact on CPI inflation. So I think that's a contributing factor and given that now a lot of the restrictions are getting eased, I do expect that food inflation should moderate.’

The retail inflation for May breached RBI's upper tolerance limit of 6 per cent, putting pressure on both the central bank and government to cool down food prices. Earlier this month, the government reduced the tariff value for import of edible oil, including palm oil, by up to USD 112 per tonne. Besides easing of restrictions, he said, a good monsoon will also have a benign impact on food prices. Talking about the effect of rising petrol and diesel prices on retail inflation, he said it will not be significant as the weightage of fuel and light category in the Consumer Price Index (CPI)-based inflation is just 7.94 per cent.

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