Cereal inflation likely to offset disinflationary forces, say experts

Wheat prices in some markets have touched Rs 2,522 a quintal and cereal inflation is expected to remain sticky in the months ahead due to low wheat stocks in central granaries. Nomura India in a report said lower rice output will put pressure on domestic rice prices. There is a possibility of a 10-15-million tonne drop in kharif rice production due to drought in several major growing states in eastern India.

“Though the government has ample rice buffer stocks, lower wheat procurement prompted higher allocation of rice under the free foodgrain scheme,” the agency said.

It said retail rice price inflation rose 9.3 per cent y-o-y as of July, and there were risks of a further rise. “Together with higher wheat prices (due to the heatwave), this means higher cereal price inflation could offset disinflationary forces from lower global commodity prices. We expect headline inflation to remain sticky above 6 per cent until February 2023,” Nomura said. The charticle captures wheat and rice price movement in major mandis in the last month and a half.