Global inflation peaked at 8.7% in 2022 due to supply chain disruptions and geopolitical tensions.
Inflation declined to 5.7% in 2024, aided by tight monetary policies of central banks worldwide.
Despite high interest rates, global economic output remained resilient, showing steady growth in major economies.
Core inflation (excluding food and energy) declined across most economies, primarily due to moderation in international commodity prices.
Food inflation is easing globally, thanks to improved harvests and stable supply chains.
However, some emerging economies, including India, Brazil, and China, continue to face food price pressures due to domestic factors.
Non-tariff measures (NTMs) and environmental regulations (such as the EU's Carbon Border Adjustment Mechanism) may influence trade and food prices.
India’s retail inflation (CPI) moderated from 5.4% in FY24 to 4.9% in FY25 (April-Dec).
Core inflation reached its lowest level in a decade, primarily due to lower service sector inflation and easing input costs.
Fuel price inflation dropped, helping to control headline inflation.
Food inflation remains high, mainly driven by a few commodities:
Vegetables (especially onions and tomatoes) saw supply shortages due to extreme weather conditions.
Pulses (tur dal) faced price surges due to production shortfalls in consecutive years.
Vegetables and pulses contribute only 8.42% to the CPI basket but accounted for 32.3% of overall inflation in FY25.
If these volatile food items are excluded, average food inflation would be 4.3% instead of 8.4%.
Climate change-induced extreme weather events (heatwaves, unseasonal rainfall, and cyclones) significantly affected vegetable production.
Between 2022-2024, heatwaves occurred on 18% of days, up from 5% in 2020-2021.
Unseasonal rains damaged crops, increasing price volatility.
Onion and tomato prices surged due to reduced production and supply chain disruptions.
Onion production fell in key states, leading to sustained inflation in FY24 and FY25.
Tomatoes have a short shelf life (1-2 weeks), making their prices highly sensitive to supply shocks.
Government interventions included buffer stock management and subsidized sales, but price volatility remained.
Tur production declined by 13.6% in 2022-23 and 10.8% in 2023-24, leading to price hikes.
There is a strong negative correlation (-0.8) between lower production and higher inflation in pulses.
India imported 7.7 lakh tonnes of tur dal in FY24 from Mozambique, Tanzania, and Myanmar to stabilize prices.
Stock limits imposed on wheat, tur dal, and chana to curb hoarding and speculation.
Duty-free imports allowed for pulses to boost domestic supply.
Buffer stock of 4.7 lakh MT of onions procured under the Price Stabilization Fund.
Subsidized sale of onions and tomatoes during peak price surges.
Monetary tightening by the RBI helped contain core inflation.
Repo rate kept at 6.5% in FY25 to balance inflation and growth.
Wholesale Price Index (WPI) inflation remained in the deflationary zone, reducing input cost pressures.
RBI projects headline inflation at 4.2% in FY26, assuming normal monsoons and no external shocks.
IMF forecasts India’s inflation at 4.4% in FY25 and 4.1% in FY26.
Global commodity prices are expected to decline by 5.1% in 2025, reducing inflationary pressures.
Climate-Resilient Agriculture
Develop weather-resistant crop varieties to mitigate climate shocks.
Expand pulses and oilseeds cultivation in rice-fallow areas to reduce import dependency.
Improved Agricultural Practices
Train farmers in high-yield, disease-resistant seed varieties.
Promote better storage and supply chain infrastructure to reduce post-harvest losses.
Advanced Price Monitoring and Data Systems
Implement real-time price tracking at different stages from farm to consumer.
Use AI and data analytics to predict price movements and take preemptive action.
Strengthening Buffer Stocks and Supply Chains
Increase onion and tomato buffer stocks to smooth out price fluctuations.
Establish vegetable clusters and farmer cooperatives to stabilize supply.
Inflation Control and Economic Policy
Inflation in India has moderated, but food prices remain volatile.
Government and RBI interventions have helped stabilize core inflation.
Impact of Climate Change on Inflation
Extreme weather is a key driver of food inflation, especially for perishable crops.
Climate-resilient agriculture is crucial for long-term price stability.
Role of Government in Inflation Management
Stock limits, imports, and buffer stocks help control food price spikes.
RBI’s monetary policy ensures macroeconomic stability.
Way Forward for Inflation Control
Better crop planning, improved logistics, and AI-based price tracking can reduce inflation volatility.
Long-term food security strategies must focus on reducing dependency on climate-sensitive crops.
