Indian Inflation Forecasted to Decline Amid Global Commodity Challenges

India's consumer price inflation is projected to drop to 4.1% by February 2025, yet risks linger due to global edible oil prices, tariffs, and climate factors. A report by the Bank of Baroda highlighted eased inflation due to vegetable price drops, but emphasized potential price pressures from commodities and weather uncertainties.

India's consumer price inflation (CPI) is projected to decrease to 4.1% by February 2025, according to research issued by the Bank of Baroda. However, despite the optimistic forecast, the report also raises caution regarding global edible oil prices, inflationary tariffs, and the potential impact of an expected hotter summer, which could keep food prices high.

The report stated, "We expect the CPI to settle at 4.1% in Feb'25 but don't entirely rule out upward pressure on food prices from globally sticky edible oil prices." Additionally, the Bank of Baroda Essential Commodity Index (BoB ECI), which measures key household items, indicated a slowdown in February, dropping to 2.4% year-on-year because of decreased vegetable prices such as tomatoes and potatoes.

While inflation in some areas such as pulses remains under control due to improved supply, and a recent fall in milk prices has contributed to the overall downturn, certain risks persist. Crucially, the report notes that price fluctuations in global assets like gold and base metals have not yet significantly influenced inflation, as energy prices have remained relatively stable.

However, metal tariffs could potentially lead to higher prices in the future. February saw increased demand and subsequent price rises in metals like copper and zinc. The report highlights the potential danger of persistent high edible oil prices driving food inflation upward. There is also concern that extreme heat may disrupt key crop supplies, aggravating food inflation further.

The Indian Meteorological Department has recorded above-normal temperatures in regions such as Maharashtra, Odisha, and Bihar, major producers of onions, tomatoes, and potatoes, respectively. The report stresses that monitoring temperature conditions diligently will be critical, particularly for wheat crops susceptible to rising temperatures. Nevertheless, governmental initiatives targeted at improving logistics and stabilizing perishable goods prices are predicted to offer some relief.

Even though inflation is anticipated to moderate, uncertainties related to global commodity prices and climate conditions could affect price trends in upcoming months. (ANI)

(With inputs from agencies.)