India's food price inflation has receded in January, with food commodity basket, estimated by CEIC, following a downward path since mid-December 2023 and reaching 4.9% in early February 2024. Official food inflation stood at 8.7% in December, the latest available data, accelerating for the second month straight. CEIC estimates food price inflation based on the retail prices for a basket of 20 major agriculture commodities covered in the CPI, including milk, staple grain and pulse (rice, wheat, moong dal, tur dal, etc.), staple vegetables (onions, tomatoes, etc.) and various oils.

CEIC's estimates come ahead of the official release of the Consumer Price Index (CPI) by the Ministry of Statistics and Programme Implementation, scheduled on 12 February. While this may not necessarily translate into similar proportions of increases in the food and beverage price index, these indicators tend to share a similar trajectory due to their composition.

Notably, drivers of high food inflation during November-December 2023 saw significant decrease in price levels, with onions priced at INR37.78/kg in January 2024 (Dec: INR50.79/kg) while tur dal and tomato prices also easing to INR150.53/kg and INR32.28/kg respectively (Dec: INR154.83/kg and INR38.18/kg respectively). That said, lower base effects in 2023 continue to place upward pressure on the overall food price index. Notwithstanding their recent month-on-month decline, onion (40.5% y/y increase), tur dal and tomato (35.2% and 31.6% y/y respectively) has been standout components driving up food price inflation with other major drivers including rice, urad dal, gram dal and moong dal (all of which exceeding 12% y/y increase).

Nevertheless, January's lower food price inflation will be a welcome relief for the Monetary Policy Committee as they convene next on 6-8 February. The December 2023 Monetary Policy Statement noted that food price inflation has previously impeded disinflation, in the context of unfavourable weather conditions, including the impact of El Niño, on the Kharif harvest. However, receding inflation in these food commodity baskets suggests that November-December's food inflation is probably transitory and unlikely to translate into generalisation of food price inflation into the broader economy.