Continued Supply Side Measures are Necessary to Prevent Frequent Food Supply Shocks

1. Continued Supply Side Measures are Necessary to Prevent Frequent Continued Supply Side Measures are Necessary to Prevent Frequent Food Supply Shocks: RBI Governor Food Supply Shocks: RBI Governor Continuing supply-side measures remains crucial in preventing the rise of food supply shocks into broader, economy-wide price fluctuations, the RBI Governor said in the minutes of the Monetary Policy Committee (MPC) meeting released on August 25. The 44th MPC meeting was held from August 8 to August 10. The six-member MPC meeting decided to keep the repo rate unchanged at 6.5%. The committee decided to maintain the “withdrawal of accommodation” stance despite headline inflation, calculated by the Consumer Price Index (CPI) currently above the target of 4%. However, headline inflation had previously decreased significantly from 6.2% in Q4 FY23 to 4.3% in May 2023, it saw a rise to 4.8% in June 2023 due to surging food prices, particularly tomatoes. In the minutes, RBI Governor Shaktikanta Das mentioned that the CPI is expected to rise significantly in July-August 2023, primarily due to the surge of tomato and other vegetable prices. It’s important to note that India’s July CPI Inflation reached a 15-month high of 7.44% in July, primarily due to the high prices of tomatoes and other edible products. RBI Deputy Governor also stated in the minutes that India grapples with the impact of intersecting localised disruptions in the supply chain, leading to a significant rise in the cost of food items sensitive to price fluctuation within the CPI, leading to an increase in headline inflation.

2. Statements Revolving Inflation Statements Revolving Inflation RBI Governor Das added, “We need to be ready to pre-empt any second-round impact of food price shocks on the broader inflationary pressures and risks to anchoring of inflation expectations”. He also stated that vegetable prices are soon gonna be normal with the upcoming fresh crops but due to the possibility of El Nino and uneven monsoon rain, prices need to be closely monitored. In response to rising food costs, the governor noted that core inflation, CPI excluding food and fuel has moderated by almost 100 basis points, from 6% in Q4 of FY2023 to 5.1% in Q1 of FY 2024, though remaining high. Deputy Governor Micheal Patra voted for maintaining the status quo on the repo rate and stated: “At the current juncture, however, the gains in output stabilisation are being threatened by the incidence of sporadic supply shocks which elevate the general level of prices instead of dissipating through relative price adjustments within the budget constraint.” Conclusion Conclusion In conclusion, the minutes released on August 25 of the MPC meeting held on August 8-10 clear the RBI's concern over food security and its impact on headline inflation. The headline inflation, calculated by CPI is currently above the target of 4%. If you’re a rice importer looking to buy rice in bulk or a rice exporter looking to export rice in bulk then you can opt for Tradologie.com. By using the Tradologie platform, purchasers have the opportunity to access premium agro-products like rice, wheat, and spices, among other commodities all at flexible prices. Tradologie.com is the world's 1st digital trade hub that specializes in international export and import of agro-commodities. The platform connects buyers and sellers from across the globe digitally via technology and assists them in the entire process. By doing so, Tradologie.com ensures reduced cost of trade, and increased efficiency enabling seamless export and imports of agro-commodities. If you want to register as a buyer, click here. If you want to register as a seller, click here. To stay updated about the latest developments in the agro-trading sector, follow Tradologie on all social media platforms.