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INTERNATIONAL FOOD prices have eased for the seventh straight month in October. This comes even as the Reserve Bank of India (RBI) is set to submit a report to the Centre on its “failure” to keep annual retail inflation below 6 per cent for three consecutive quarters and the “remedial actions” proposed to be taken to achieve the target.
The UN Food and Agricultural Organisation’s Food Price Index (FPI) averaged 135.9 points in October, marginally lower compared to the previous month’s 136 points. This marks the seventh successive month of decline in the index, which is a weighted average of world prices of a basket of food commodities over a base period value, taken at 100 for 2014-16.
The FPI scaled an all-time high of 159.7 points in March, the month that followed Russia’s invasion of Ukraine. The latest index value of 135.9 is the lowest since the 135.6 level of January, which was before the war. On a cumulative basis, the benchmark gauge has fallen by 14.9 per cent between March and October.
The dip in the overall FPI in October has been despite the cereals sub-index posting an increase from 147.9 to 152.3 points. Global wheat and maize prices rose month-on-month largely on the back on uncertainties relating to exports from Ukraine.
Russia had, last weekend, suspended its participation in the UN and Turkey-brokered Black Sea Grain Initiative that allows safe passage of Ukrainian agri-commodities through designated ports. About 10 million tonnes of grain, oilseeds and other food products were shipped out by Ukraine during August-October under the deal, which unblocked the country’s ports on the Black Sea. Russia, on Wednesday, agreed to rejoin the initiative after briefly pulling out — a move that led to a spike in global grain prices earlier this week.
At pre-war level, sign of relief
The global food price index in October is at almost the same level as it was in January, a month before Russia attacked Ukraine. But global worries on inflation are likely to weigh on central banks, which continue with strong monetary action of policy rate hikes.
All other major sub-indices constituting the FPI registered drops in October over September. The vegetable oils sub-index fell from 152.6 to 150.1 points; so did that of sugar (109.7 to 109 points), dairy (142.6 to 140.1) and meat (120.1 to 118.4). The vegetable oils and sugar sub-indices for October were, in fact, 18.8 per cent and 8.5 per cent down from their respective year-ago levels.
The continued easing of international food prices is some relief for the RBI’s monetary policy committee. This is especially so, given that food items have a 45.86 per cent weight in the official consumer price index. While overall year-on-year retail inflation in September, at 7.41 per cent, stood well above the “upper tolerance level” of 6 per cent mandated by the Narendra Modi government, food inflation was even higher, at 8.6 per cent.
Global food prices coming off from their highs reduces the risks of imported inflation, which was seen particularly in edible oils. The Modi government and RBI would also be hoping for an easing of domestic price pressures. These have remained elevated, mainly on account of extended southwest monsoon rains damaging the harvest-ready kharif crops in many parts of the country.
The same excess rains have, however, helped fill dam reservoirs and recharge groundwater aquifers that should favour the rabi (winter-spring) crops now being planted. Early indications — based on improved soil moisture as well as fertiliser availability — point to a substantial increase in the area being sown under wheat, mustard, chickpea, red lentils, field pea, maize, potato, onion, garlic, cumin, coriander and other crops that are harvested from March.
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