Food inflation, which stood at 6.6% in FY23, increased to 7.5% in FY24.
The central government's timely interventions and stability measures by the Reserve Bank of India (RBI) helped maintain retail inflation at 5.4% despite the pandemic and geopolitical tensions, according to the Economic Survey 2024.
Headline inflation, which the RBI expects at 4.5% in FY25 and 4.1% the following year, is "under control", said Finance Minister Nirmala Sitharaman. The inflation rate of some food items, however, is elevated, the government admitted.
Economic Survey 2024, which gives an insight into the current state of the economy, was tabled by the Finance Minister in the Parliament this morning, a day before presenting her seventh Budget.
The survey said supply disruptions caused by the COVID-19 pandemic and global conflicts led to an increase in the prices of consumer products and services in FY22 and FY23. However, timely policy interventions by the government helped maintain the retail inflation at 5.4% in FY24, it added.
This is the lowest the retail inflation has eased since the pandemic.
The survey also attributed the low retail inflation rate to price cuts for LPG and fuel by the government. The government reduced LPG prices by Rs 200 across India last August and cut petrol and diesel prices by Rs 2 this March.
The RBI raised policy rates by a cumulative 250 bps between May 2022 and February 2023, managed liquidity levels efficiently, and maintained consistent and coherent communication with market participants, the effect of which was reflected in the latest inflation data, the survey said. The retail inflation for last month was at 5.1%.
The core inflation has declined to a 4-year low, the survey added.
Food inflation, which stood at 6.6% in FY23, increased to 7.5% in FY24. The survey attributed the rising food prices to adverse weather conditions, depleted reservoirs, and crop damage, which impacted farm output and food prices.
Tomato prices spiked due to region-specific crop disease, early monsoon rains, and logistical disruptions, it said.
The survey also said that the Indian economy has recovered and expanded in an orderly fashion post pandemic. The economy is expected to grow between 6.5% and 7% this financial year, the government said.