NEW DELHI (Reuters) -India expects food inflation to slow in the coming months, backed by a bumper summer crop harvest, and remains “cautiously optimistic” on its economic growth, according to a government report.
“A bumper kharif (summer crop) harvest is expected to lower food inflation in the coming months,” the report said.
India’s retail inflation surged to a 14-month high in October, driven by high vegetable prices.
A favorable monsoon, adequate reservoir levels and higher minimum support prices are likely to boost winter crop sowing and production, it said.
“Early November trends signaled moderation in key food prices, though geopolitical factors may continue to impact domestic inflation and supply chains,” it said.
The report said many high-frequency indicators of economic activity in India have shown a rebound in October after a brief period of softening momentum.
Persistently high inflation has squeezed India’s middle class budgets, slowing urban consumption in the last few months and threatening brisk economic growth. India expects the economy to grow at 6.5%-7% in the financial year that ends in March.
India’s export recovery may encounter challenges due to softening demand in developed markets, the report said, with trade in services sustaining momentum.
“Geopolitical developments and policy decisions of the next administration in the United States will determine the course of trade and capital flows,” it said.