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Falling international commodity prices and the arrival of new crops from Kharif will dampen inflationary pressures in the coming months, the Finance Ministry said in its monthly economic review report on Thursday. The development comes at a time when retail inflation based on the consumer price index (CPI) fell to a three-month low of 6.77% in October, down from 7.41% in September and inflation based in the index based on wholesale prices decreased to 8.39. % in October from 10.7% in September.

The Ministry of Finance has cited rising fuel prices as one of the main contributors to the gap between CPI and WPI inflation in recent months. However, he said that the difference has been closing due to the moderation of international prices of raw materials, which has alleviated wholesale inflation and the transfer of prices of inputs from producers to consumers in the midst of a Strong demand has led to an increase in retail inflation.

“Looking ahead, the downward trend in international commodity futures prices for the coming months in the energy sector, base metals (except aluminum), fertilizers and agricultural products also suggests that, Overall, input cost pressures are likely to continue to ease under the assumption of a stable global scenario. . RBI business surveys also indicate that pressure on input prices is expected to ease in the second half of the current fiscal year,” the report says.

“Going forward, current retail inflationary pressures are expected to ease with the help of arrivals from Kharif and the pass-through of lower global commodity prices, also affirmed by RBI’s third-quarter inflation projections in 6.5 percent and the fourth quarter at 5.8 percent, with risks evenly balanced. and 5.0% for the first quarter of 2023-24,” he added.

In addition, household inflation expectations for September of this year have skyrocketed to 10.8% in three months and 11% in one year. The report said that higher inflation expectations have been influenced more by existing inflationary conditions than by falling international commodity prices. The report said that the downward trend in future international commodity prices suggests that input cost pressures will ease in the coming months. In order to reduce inflation, the Reserve Bank of India has also raised the key repo rate by 190 basis points to 5.90% since May.

Meanwhile, domestic prices of edible oils such as sunflower, palm oil and soybean oil rebounded due to rising global prices and supply chain constraints amid the Russia-Ukraine crisis, potentially threatening the affordability of food supplies. Food security in India has also likely been under threat in recent months. However, the ministry said that through proactive and preventive government interventions, the situation is stabilizing in India. In addition, an increase in crop exports has also ensured the availability and stability of domestic prices.

“India’s food security is stable with well-provisioned food security programs to meet the needs of the poor, complemented by export restrictions. Affordability on the free market has also been on the rise with prices of various items such as edible oils and eggs in the CPI food basket declining. The increase in tractor sales in September and October also points towards better confidence and an expected increase in crop area planted,” the ministry said in a statement.

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