In its monthly economic assessment, the Finance Ministry expressed optimism that a strong kharif (summer crop) harvest will soon lead to a decrease in the prices of essential food products, lowering food inflation in the upcoming months, even though the Reserve Bank of India is still concerned.
"Early November trends signalled moderation in key food prices, though geopolitical factors may continue to impact domestic inflation and supply chains," according to the monthly economic study published by FIS.
Speaking further on inflation, the ministry stated that changes in the prices of edible oils, tomatoes, onions, and potatoes will have a significant impact on the inflation trajectory. "On the positive side, the early trend visible in vegetable prices in November so far signals significantly lower inflation in tomato and onion," the report stated.
RBI concerned, FinMin is at ease:
"Early November trends signaled moderation in key food prices, though geopolitical factors may continue to impact domestic inflation and supply chains," according to the report.
While Nirmala Sitharaman's Finance Ministry anticipates inflation to fall, the RBI has remained on the opposing side. The Reserve Bank of India has maintained interest rates steady for nearly two years, with Das consistently dismissing the prospect of rate cuts despite the central bank's recent shift to neutral policy stance. A strong increase in inflation in October to above the 6% upper end of the target band has given the RBI more cause to remain hawkish. Most economists predict a rate drop early next year.
Within the government, there is a rising call for the RBI to soften. Finance Minister Nirmala Sitharaman and Trade Minister Piyush Goyal have recently stated that high borrowing costs are harming the economy.
The next rate decision is set for December 6. Das' current three-year contract expires on December 10, and neither the government nor the RBI have said whether the governor would continue in his position.
