Though the monsoon continues to be poor despite the pick-up in recent weeks, chances are this will not affect food inflation levels in any serious manner. As the Citi Research graphic shows, fruit and vegetable inflation was much higher last year, which had a normal monsoon; by contrast, inflation levels this year are lower despite the still poor monsoon.
The larger driver of food inflation, it appears, is not as much the poor rain — erratic rain, of course, does affect prices — as it is high increases in minimum support prices and high rural wages, the latter a function of high government spending. With government-spend on a tight leash, MSP hikes very low and the government offloading FCI stock, it is not surprising that food inflation levels have been a lot more tempered this year.
– fe Bureau | Financial Express