Geo political tensions to cause supply disruptions, jack up commodity prices: Finance Ministry

Finance ministry has said retail inflation is at its lowest rate in the last eleven months, cautioning that the ongoing geopolitical tensions have the potential to disrupt supply chains and drive up international commodity prices. The ministry said the prices of clothing, footwear, housing, household goods and services, health, education have come down in the last eleven months.

"The inflation trajectory will be influenced by several factors. Government initiatives, including the open market sales, monitoring of stocks, import of pulses, and export restrictions, are expected to help stabilize food prices. The forecast of normal rainfall for the Southwest Monsoon 2024 bodes well for food production and could alleviate price pressure on food items. Ongoing geopolitical tensions could potentially drive up international commodity prices and disrupt supply chains," the ministry said in the monthly economic review for April released today.

The report said the retail inflation in the country has shown signs of moderation on the back of dip in core inflation, and contribution from the fuel and light basket.

"Retail inflation based on consumer price index (CPI) decreased from 4.85% in March 2024 to 4.83% in April 2024, marking it as the lowest rate in the past 11 months. The modest reduction in retail inflation in April 2024 was primarily due to a drop in core inflation (which excludes food, fuel and light), which reached a record low of 3.2%, the lowest since January 2014. The decline in core inflation in April was largely due to reduced inflation rates in various items including clothing, footwear, housing, household goods and services, health, education, recreation, amusement, transport and communication,” the ministry said in the report.

For the eighth month in a row, prices in the fuel and light group remained in the deflationary zone, the ministry said. It may be noted that in March, the government reduced the price of non-subsidised LPG by ₹100 per 14.2 kg cylinder. This price cut had a ripple effect in April too.

Government expects the wheat prices to come down. "Wheat price is expected to cool down by the current wheat procurement. Edible oils prices continued to remain in a deflationary zone. Most of the remaining essential commodities witnessed the softening of price pressures assisted by the slew of administrative measures taken by the government. The inflation trend for milk continued its decline over the past year. Sugar inflation saw a notable drop compared to the trends observed in the previous four months. Further, the sowing of summer crops is progressing favourably," the economic review pointed out.

"As of 10 May 2024, the area sown under the summer crops expanded by 8.9% compared to the corresponding period last year. Crops like rice, Shree anna coarse cereals, pulses and oilseeds contributed to the increased acreage. This would translate into augmented production," it said.