Govt Expects Inflation to Ease Slightly Next Month

The Ministry of Finance expects inflation to remain around 27.5-28.5 percent in January 2024 and further ease out to 26.5-27.5 percent in February 2024.

In its Monthly Update & Outlook for January, the ministry said that the elevated prices of perishables and vegetables, coupled with increased utility costs (electricity and gas), have contributed to the inflationary pressure.

The surge in onion export orders following the Indian ban has strained local supply and increased domestic prices. Specific commodities, such as tomatoes, witnessed price hikes due to supply disruptions caused by severe weather, intensifying the demand-supply gap. Similarly, chicken prices rose due to reduced supply, particularly from controlled sheds experiencing higher input costs.

However, it said that the government has taken measures to reduce onion export by increasing the minimum export price and also lifted the ban on soybean import which would ease the supply situation of perishables and chicken.

In January FY2024, there is a slight moderation in the inflation outlook compared to the preceding month. Though, yet, challenges persist in the form of supply chain disruptions and increased utility prices, the decline in fuel cost offers a promising counterbalance, potentially mitigating the overall impact on consumers and production sectors.

The Food and Agriculture Organization’s food price index, which tracks the most globally traded food commodities, averaged 118.5 points in December 2023 down by 1.5 percent from November level as decreases in the price indices for sugar, vegetable oils, and meat more than offset increases in dairy products and cereals.

The report also highlighted that CPI inflation was recorded at 29.7 percent on a YoY basis in December 2023 as compared to 24.5 percent in December 2022. During Jul-Dec FY 2024, CPI stood at 28.8 percent against 25.0 percent in the same period last year.

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