Shaping Tomorrow: RBI’s Vision for Mitigating Food Price Volatility

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INVC NEWS
New Delhi : The problem of high food inflation in India will be less severe in the future, as modern supply chains with diversified sources can help deal with sudden spikes in prices of specific food items, a member of the RBI Monetary Policy Committee (MPC) said. Emphasizing that food accounts for a high share of the household budget in India, he said policy needs to focus on increasing agricultural productivity, as stable agricultural prices are important for growth beyond inflation. He said that as India develops, the severity of this high food inflation will reduce due to several reasons.

Modern supply chains with diverse sources will help deal with rising prices of specific commodities. Nobody has heard of tomato or onion prices rising in advanced economies. He said that given that we have naturally diverse geographies, better integrated markets from different regions could help mitigate climate change-induced food price increases.

According to official data, retail inflation fell to a five-month low of 4.85 percent in March, mainly due to lower food prices. Inflation in food items stood at 8.52 percent in March, which was 8.66 percent in February. RBI Governor Shaktikanta Das recently said that inflation will decline to 4.5 percent in 2024-25. It was 5.4 percent in 2023-24 and 6.7 percent in 2022-23.

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