Economic Survey 2024-25 lists global pressure, domestic challenges as factors affecting prices, inflation

The Economic Survey 2024-25, tabled by Finance Minister Nirmala Sitharaman on Friday in the Lok Sabha, listed challenges that drove inflation rates in the current fiscal year. From global conflicts to low production, India was able to navigate all these challenges as its retail inflation moderated from 5.4 per cent in FY24 to 4.9 per cent in FY25 (April-December).

The survey highlights that inflation in India will witness positive signs in inflation management. The Reserve Bank of India and the IMF have projected that India’s consumer price inflation will align with the target of 4 per cent in the next financial year.

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The economic survey, documented by a team under Chief Economic Adviser V Anantha Nageswaran, was tabled just a day ahead of the Union Budget. It provides an overall assessment of India’s economic performance in the current fiscal year.

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Here are some of the hiccups that disrupted markets around the world as well as domestically, affecting prices and inflation rates:

• The prices of onions and tomatoes were affected by the decline in production owing to extreme weather conditions and monsoon-induced supply chain disruptions. Meanwhile, India, which is a major producer of pulses, witnessed a gap in its demand and supply. Despite this, administrative measures adopted by India helped curb food inflation. Excluding prices of tomato, onion and potato from the basket, the average food inflation rate in FY25 (April-December) was 6.5 per cent, which is 1.9 per cent lower than the current food inflation

• Global inflation, which reached a peak of 8.7 per cent in 2022 due to supply chain disruptions and geopolitical tensions, has declined to 5.7 per cent in 2024. Global food inflation is declining, mirroring trends in both headline and core inflation. This easing is driven by improved global supply conditions, supported by strong harvests and favourable growing environments

• The survey says that India must tackle the twin challenges of boosting agricultural productivity and addressing climate change. Developing climate-resilient crop varieties and adopting advanced farming practices are crucial to mitigating the impact of extreme weather and stabilizing food prices

A way forward

While several factors have driven inflation rates in the current financial year, India’s output for FY25-26 looks positive, according to the Economic Survey.

“The RBI and the IMF have projected that India’s consumer price inflation will progressively align towards the inflation target in FY26. In December 2024 RBI’s Monetary Policy Committee report revised its inflation projection from 4.5 per cent to 4.8 per cent in FY25. Assuming a normal monsoon and no further external or policy shocks, the RBI expects headline inflation to be 4.2 per cent in FY26,” it said.