The Cooling Effect

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(Source: The Indian Express, Editorial Page)

Also Read: The Indian Express Editorial Analysis: 13 June 2025
Also Read: The Hindu Editorial Analysis: 13 June 2025

Topic: GS3 – Indian Economy, Agriculture, Monetary Policy
Context
India’s consumer price index (CPI) has eased to 4.75% in May 2025 due to a decline in food prices. This comes at a crucial time when the RBI has retained its benchmark repo rate and the agricultural sector anticipates a normal monsoon. The editorial explores how these intersecting factors influence inflation and food security.

Recent Inflationary Trends:

  • Retail CPI: Inflation eased to 4.75% in May from 4.83% in April.

  • Food Prices: Food inflation moderated to 8.69%, aided by cooling vegetable and pulse prices.

  • Core Inflation: Stable around 3.8%, reducing policy concerns for RBI.

Role of Monsoon in Inflation:

  • IMD has forecasted a normal southwest monsoon, raising hopes for a good kharif harvest.

  • Agricultural output will impact cereal and vegetable prices, particularly onion and tomato.

RBI’s Policy Response:

  • RBI kept the repo rate unchanged at 6.5% to balance inflation and growth.

  • RBI signaled cautious optimism but maintained its stance to assess monsoon outcomes before easing further.

Risks and Uncertainties:

  • Global oil prices, commodity volatility, and geopolitical tensions remain inflationary risks.

  • Unseasonal rains or pest damage could reverse recent food price gains.

Conclusion / Way Forward:

  • Strengthening agricultural supply chains and warehousing can prevent price shocks.
  • Continued cautious RBI policy, combined with real-time inflation monitoring, is essential.
  • A good monsoon can be a stabilizing factor, but preparedness for climate disruptions is crucial.

Inflation Snapshot (April–May 2025):

Indicator April 2025 May 2025
Retail Inflation (CPI) 4.83% 4.75%
Food Inflation 9.12% 8.69%
Vegetable Inflation 27.8% 23.6%
Pulse Inflation 16.84% 15.2%
Repo Rate (RBI) 6.50% 6.50%
Practice Question: “The recent moderation in inflation must not delay structural reforms in India’s food economy.” Discuss. (GS Paper 3 – 10 Marks – 150 Words)

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