Retail food inflation to ease in second half of FY21: CRISIL

CRISIL expects India’s retail food inflation, which is measured through consumer price index (CPI), to cool down in the second half of the ongoing fiscal year on account of the effect of the high base of the previous year, along with a bumper Rabi harvest and a good prospect of Kharif harvest.

The rating agency mentioned that the increasing infection of COVID-19 in the rural areas may adversely impact the harvest and the supply chain, pushing up retail food to a price, which is a key risk for its estimates. 

However, the key risk to this forecast is a faster spread of COVID-19 afflictions in the hinterland. As per the report, since the lockdown began in late March, wholesale and retail food prices have diverged. In April-July, the average wholesale price index (WPI) food inflation was 2.9 per cent, while CPI food inflation was 9.8 per cent. Moreover, farmers did not benefit from this divergence.

A detailed analysis of 25 key field and horticulture crops done by CRISIL indicates that per hectare profitability will improve 3-5 per cent year-on-year to Rs 10,000 in Kharif season 2020, based on C2 or the cost of production. Sugarcane and paddy continue to be the highest profit-generating field crops due to government support while apple is expected to lead horticulture profitability.