Weather drove food inflation in FY24: Economic Survey

Guwahati: Food prices went up last fiscal due to adverse weather conditions, the Economic Survey released on eve of the union budget, has said.

The survey has pointed out that India’s agricultural sector faced challenges due to extreme weather events, depleted reservoirs and crop damage. These impacted farm output and food prices.

“Consequently, food inflation stood at 6.6 per cent in FY23 and increased to 7.5 per cent in FY24,” says the Survey report.

“Unfavorable weather conditions in FY24 constrained food production. Tomato prices rose due to region-specific crop disease, early monsoon rains, and logistical disruptions. Onion prices spiked because of rainfall during the last harvest season affecting rabi onion quality, delayed sowing of Kharif onion, prolonged dry spells impacting Kharif production, and trade-related measures by other countries.”

This is of importance to get a perspective on the current price rise in vegetables in states like Assam where floods have affected agricultural production.

The survey mentions, however, that the government (Centre) took administrative action including dynamic stock management, open market operations, subsidized provision of essential food items and trade-related measures by other countries.
Food inflation has been a global concern over the past two years, it says.

In FY24, most state and union territories – 29 out of 36 states – recorded less than 6% rates, notes the Survey. States with elevated food prices tend to experience higher rural inflation due to the greater weightage of food items in the rural consumption basket, it states.

“Additionally, inter-state variation in inflation is more pronounced in rural areas than urban areas.”

Be that as it may, core goods inflation declined to a four-year low last fiscal.

The Survey highlights that the decrease in retail inflation in FY24 was driven by a fall in core inflation - both goods and services. Core services inflation eased to a nine-year low in FY24.  

“In FY24, core consumer durables inflation declined due to an improved supply of key input materials to industries. This was a welcome change after the progressive increase in consumer durables inflation between FY20 and FY23.”