In 2023, India's inflation rate was within its target range of 2 to 6 per cent. Compared to advanced economies like the USA, Germany, and France, India had one of the lowest deviations from its inflation target in the triennial average inflation from 2021-2023.
As the global energy price index experienced a sharp decline in FY24, retail fuel inflation also stayed low.
From the pandemic-driven highs, inflationary pressures in India eased in FY22, aided by softening food inflation. However, core inflation had risen to 6 per cent at the same time, driven primarily by rising international commodity prices.
Inflationary pressures firmed up in FY23 yet again driven by the Russia-Ukraine war disrupting the recouping supply chains leading to a rise in food and fuel prices. As economic activity gained momentum, core inflation also increased slightly and was primarily driven by core services inflation as house rents went up, with people returning to urban areas.
In FY24, the price situation improved. CPI inflation moderated, driven by a decline in core inflation - both goods and services. Core services inflation eased to a nine-year low in FY24; at the same time, core goods inflation also declined to a four-year low.
In FY23 and FY24, the agriculture sector was affected by extreme weather events, lower reservoir levels, and damaged crops that adversely affected farm output and food prices. So, food inflation based on the Consumer Food Price Index (CFPI) increased from 3.8 per cent in FY22 to 6.6 per cent in FY23 and further to 7.5 per cent in FY24.
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