Food inflation to ease in next few months on bumper kharif harvest: Govt report

The review also said the Indian economy is holding its ground despite mixed global outlook.

Food inflation is expected to calm down in the next few months on the likelihood of a bumper kharif harvest, the finance ministry said in a monthly economic review for October.

India’s retail inflation jumped in October 6.21 percent, a 14-month high, driven by elevated food inflation in a “few vegetables”, the review said. “Supply disruptions from heavy rains in major producing states contributed to price pressures in tomatoes, onions, and potatoes, while elevated global prices drove up oil and fat inflation.” It said.

Moreover, a favourable monsoon, adequate reservoir levels and higher minimum support prices are likely to boost rabi sowing and production.

The review also said the Indian economy is holding its ground despite mixed global outlook.

The report further said that many high-frequency indicators of economic activity have shown a 'rebound' in October amid a clouded global economy and a brief period of softening momentum over the monsoon months.

The indicators include rural and urban demand and supply side variables like Purchasing Managers’ Index and E-way bill generation, the report released by the department of economic affairs said.

"On the employment front, the formal workforce is expanding, with notable increases in manufacturing jobs and a strong inflow of youth into organised sectors", the finance ministry report said.

Going ahead, the economic outlook is "cautiously optimistic" for the next few months, with agriculture likely to benefit from favourable monsoon conditions, increased minimum support prices and adequate supply of inputs, it said.

Persistently high inflation has squeezed India's middle class budgets, slowing urban consumption in the last few months and threatening brisk economic growth.

India expects the economy to grow at 6.5%-7% in the financial year that ends in March.

India's export recovery may encounter challenges due to softening demand in developed markets, the report said, with trade in services sustaining momentum.

"Geopolitical developments and policy decisions of the next administration in the United States will determine the course of trade and capital flows," it said.

With Reuters input