FinMin review says above-normal monsoon may ease inflation

The prediction of an above-average monsoon this year augurs a good harvest, which in turn could bring down food price inflation, a monthly economic review by the finance ministry said on Thursday. The report also made the forecast that India’s trade deficit looks all set to decrease in the years ahead.

The finance ministry’s prediction that a good harvest would curb inflation comes in the wake of the India Meteorological Department’s (IMD) announcement last week that the country is all set to receive above-normal monsoon rains in 2024.

“Further easing of food prices is on the anvil as IMD has predicted above-normal rainfall during the monsoon season, which is likely to lead to higher production,” the finance ministry report stated, adding that the situation “bodes well for a good harvest, easing inflation concerns”.

In India, where farm produce all over the country largely banks on the monsoons, an above-average rainfall during this period would mean improved food production, which, in turn, would go a long way in bringing down food prices and inflation.

Food price inflation is responsible for almost 50 per cent half of the entire consumer basket. It increased by 8.52 per cent in March 2024 after witnessing a rise of 8.66 per cent rise in February this year.

While focussing on India’s trade deficit, the finance ministry’s monthly economic review said the deficit is poised to decrease in the years ahead because the Production Linked Incentive (PLI) scheme, which is meant to boost manufacturing, would ultimately extend to several other sectors.

The total deficit in merchandise trade that India witnessed in the fiscal year 2023-’24 was $240 billion. This was an improvement from the $265 billion deficit that the country experienced in the fiscal 2022-’23.