Low inflation masks a growing problem of fruitless agriculture

Soft food prices have made farming even harder for farmers. Their interests suffer neglect too often

- HIMANSHU

The latest inflation estimates based on the consumer price index (CPI) and wholesale price index (WPI) have brought cheer to policymakers and financial markets. For June, retail inflation, as measured by the CPI, was recorded at 2.1% on a year-on-year basis. Rural inflation was even lower, at 1.72%, while it was 2.56% in urban areas. These are India's lowest readings since January 2019, when the economy was in a slowdown. Wholesale inflation, in fact, turned negative, with prices down 0.13% in June from a year earlier.

While inflation at a six-year low is good news for the central bank and policymakers who have struggled to bring it down, the composition of our inflationary trends across commodities and their groups should be a worry for India's economy. At both the retail and wholesale levels, the decline in inflation was driven largely by food prices. In the retail case, food inflation has turned negative, with prices declining 1.1% from a year earlier (rural food inflation was at -0.9% and urban at -1.2%). A better picture emerges from WPI data, which shows food inflation at -3.8%. Unlike retail, wholesale inflation has seen a sharp decline since December 2024, when it was 8.5%. The reading has declined steadily since.