The Economic Survey 2024-25 reveals a sharp rise in food inflation, which increased from 7.5% in FY24 to 8.4% in FY25. The surge was primarily caused by extreme weather events such as heatwaves and unseasonal rainfall, which hit key crops like tomatoes and onions. Retail inflation averaged 5.4% during the same period, surpassing the RBI’s target, with food inflation being a key driver.
BY PC Bureau
The Economic Survey 2024-25, presented in Parliament, offers a comprehensive overview of India’s economic landscape, providing insights into inflation, stock market risks, and global economic challenges. As India continues to navigate both domestic and international uncertainties, key factors such as inflationary pressures, retail investor behavior, and global market movements take center stage in the survey’s findings. Here are the main points from the Economic Survey:
Key Highlights of the Economic Survey 2024-25
Category |
Details |
Food Inflation |
– The Consumer Food Price Index (CFPI) increased from 7.5% in FY24 to 8.4% in FY25 (April-December). |
– Primary contributors: Vegetables and pulses, impacted by extreme weather events such as heatwaves and unseasonal rainfall. |
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– Tomato prices surged by 37% in summer due to heatwaves, and onion prices were 20% above the five-year average due to erratic rainfall in key growing regions. |
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Retail Inflation |
– Average retail inflation in FY25 was 5.4%, exceeding the Reserve Bank of India’s (RBI) target of 4%. |
– Core inflation (excluding food and fuel) stood at 4.1%, but service-related inflation in housing, healthcare, and education saw rising costs.ALSO READ: Economic Survey 2024-25: Food Inflation Hits 8.4%, |
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– Housing rents rose by 12%, and healthcare costs increased by 6.5%, attributed to high urban demand, wage growth, and supply chain issues. |
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Impact of US Market Movements |
– The Nifty 50 index showed a strong correlation with the US S&P 500. Historically, when the S&P 500 corrected by over 10%, the Nifty 50 posted a 10.7% decline on average. |
– The rising participation of new retail investors in India, many of whom have never experienced a market correction, may lead to non-trivial impacts on sentiment and spending if a correction occurs. |
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Global Inflation Trends |
– Global inflation rates have eased since the post-pandemic highs. The US saw a reduction from 6.5% in 2023 to 3.4% in 2024, while the Eurozone’s inflation fell to 2.9%. |
– However, global risks such as the EU’s carbon border tax, the US Federal Reserve’s cautious rate cuts, and China’s deflationary concerns remain. |
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– Despite a decline in global commodity prices (e.g., crude oil), the weaker rupee continues to pose challenges for sectors reliant on imports. |
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RBI and Government Measures |
– RBI’s steady repo rate of 6.5% in 2024 aims to anchor inflation expectations and stabilize the economy. |
– Government interventions included releasing 5 lakh tonnes of wheat and rice from buffer stocks to stabilize food prices and launching Rs 10,000 crore incentives for food processing. |
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– Investments in cold storage and logistics infrastructure are designed to strengthen food supply chains in the long term. |
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Outlook for FY26 |
– Inflation is projected to ease to 4.5% in FY26, though food prices remain uncertain due to climate-related disruptions and global supply chain challenges. |
– If global oil prices stabilize and domestic food supply chains improve, inflationary pressures may subside further. |
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Climate Impact on Agriculture |
– The survey noted a 15% increase in crop damage over the past three years due to erratic weather. This trend has contributed to higher food price pressures.
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