The more benign outlook for food prices, compared to six months ago, should be reason enough for the Reserve Bank of India’s monetary policy committee to consider a cut in its benchmark “repo” lending rate.
The southwest monsoon this time has been the best since 2020 — the year Covid struck — with the all-India weighted rainfall being 7.6 per cent above the normal long period average (LPA) for the season (June-September). As many as 23 out of the country’s 36 meteorological subdivisions received rains more than their LPAs and only seven registered significant shortfall exceeding 15 per cent. The monsoon was also temporally well-distributed. Rainfall was 11 per cent below normal in June, but above the LPAs in July (9 per cent), August (15.3 per cent) and September (11.6 per cent). The effects of these have been seen in higher acreages under most kharif crops — barring a few such as cotton, bajra and urad where the decline had more to do with relative prices than rainfall — and water levels in major reservoirs rising to nearly 88 per cent of full storage capacity, as against the 10-year-average of 77 per cent for this time.
The monsoon-aided bumper kharif crop, whose market arrivals will take off in the next few days, should enable a further softening of consumer food inflation. It has already eased somewhat to 5.4-5.7 per cent year-on-year in July and August, after ruling close to double digits for much of the time since mid-2023. That high inflation period coincided with El Niño and heat waves, impacting both the kharif and rabi crops in 2023-24. This time, there has been no El Niño — and with the Met Department forecasting above-normal rains in the post-monsoon season (October-December) as well as a colder-than-usual winter on the back of a developing La Niña, the prospects look good for the upcoming rabi crop too. That should, in turn, translate into an overall good agricultural year following a poor 2023-24.
The more benign outlook for food prices, compared to six months ago, should be reason enough for the Reserve Bank of India’s monetary policy committee to consider a cut in its benchmark “repo” lending rate. Whether or not that happens at the rate-setting panel’s meeting early next week, the stage has definitely been set. An agricultural production rebound will also be good for rural incomes and consumption, which has been a drag on the economy for some time now. The Narendra Modi government has been proactive in dealing with food inflation — through measures both good (lowering import duties on pulses and edible oils) and bad (banning/curbing exports of cereals, sugar and onion and imposing stockholding limits on wheat and pulses). It should show similar alacrity when it comes to farmers. The recent moves on relaxing restrictions on rice and onion shipments, and approving procurement of soyabean by states at the minimum support price, are welcome.
© The Indian Express Pvt Ltd
First uploaded on: 05-10-2024 at 01:00 IST
