Cereal, edible oil prices seen rising, volatility in commodity prices pose upside risk to inflation outlook: RBI bulletin

Though headline inflation has moderated significantly from above 6% in October 2024 to 3.6% in February 2025, high frequency food price data for March so far (up to 17th) show an increase in cereal prices, both for rice and wheat, Reserve Bank of India (RBI) officials said. 

Edible oil prices have firmed up as well – mainly driven by palm, soybean and sunflower oil, they said in the State of the Economy article published in the March edition of RBI Bulletin released on Wednesday.

Pulses prices, on the other hand, continued to show broad-based moderation. Prices of key vegetables including potato, onion and tomato witnessed further correction, they added.

Stating that in the tariff war regime, the pass-through of higher tariffs to consumer prices remains a key risk to inflation, which is already exhibiting signs of stubbornness in many Advanced Economies (AEs), they said the central banks in AEs would have to factor in such pressures while calibrating policy responses in an environment of potential slowdown in growth.

They said while facing challenges from weakening global trade and tariff uncertainty, India’s external sector continued to find support from resilient services exports, which remain less affected by global disruptions. 

“Going forward, India’s structural strengths—sound fiscal policies, a well-calibrated monetary framework, and digital transformation initiatives—are expected to provide a strong foundation for long-term sustainable economic growth,” they stated.

“Domestically, macroeconomic fundamentals remain strong, and economic growth is poised to sustain momentum driven by robust domestic demand, steady investment activity, and ongoing policy-driven infrastructure development along with a pick-up in government spending,” they emphasised.

Robust kharif production, better rabi sowing coupled with higher reservoir levels and seasonal winter correction in vegetable prices augur well for food inflation, although volatility in commodity prices and weather anomalies remain potential upside risks to the overall inflation outlook, they concluded.