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Monsoon Boost to Cool Food Prices—But Inflation Fears Loom for FY27

Good monsoon rains and better sowing are set to cool food inflation in the second half of FY26. However, an unfavorable base effect is expected to push prices higher again in FY27. Wholesale inflation has already eased to a more than two-year low, helped by falling vegetable and grain costs. The report highlights that while recent trends are positive, future inflation could be influenced by global commodity prices.

Key Points: Above-Normal Monsoon to Ease Food Inflation in H2FY26

  • Above-normal monsoon rains and improved sowing to support lower food inflation in H2FY26
  • Adverse base effect likely to push food inflation higher in FY27
  • Wholesale inflation hit its lowest level in over two years in October
  • Vegetable, cereal, and pulses prices declined, aiding the disinflation trend
2 min read

Above-normal monsoon rains to cool food prices in H2FY26, but base effects seen lifting inflation in FY27: Report

ICICI Bank report forecasts lower food inflation in H2FY26 due to good monsoon and sowing, but warns of a rebound in FY27 due to adverse base effects.

"Higher rainfall and sowing bode well for the outlook in H2FY26, but an adverse base should push food inflation higher next year (FY27) - ICICI Bank Report"

New Delhi, November 16

Above-normal monsoon rains and improved sowing conditions are expected to support a benign food inflation trajectory in the second half of the Financial Year (FY) 2026. However, an adverse base is likely to push food inflation higher next year (FY27), according to ICICI Bank's Global Markets sectoral update on the outlook for wholesale inflation.

A base effect refers to how this year's inflation appears higher or lower simply because of unusually high or low prices in the same period last year.

"Higher rainfall and sowing bode well for the outlook in H2FY26, but an adverse base should push food inflation higher next year (FY27)," the report added.

The outlook comes amid India's wholesale inflation easing to its lowest level in over two years.

Wholesale inflation slipped into deeper contraction in October, driven largely by a sharp fall in primary food articles.

Vegetable prices continued to cool, helped by steady supplies and favourable weather, while cereals, pulses, spices, and fruits also recorded declines.

On a month-on-month basis, food prices remained broadly unchanged, signalling that the steep disinflation of recent months may be stabilising.

The broader primary articles category posted another month of contraction, extending its streak of negative prints amid weak pricing in food and non-food components.

The report noted that the correction in several high-frequency items, such as tomatoes, onions, and select grains, has significantly reduced wholesale food inflation this year.

Fuel inflation remained in negative territory, supported by lower global crude prices compared to last year. While certain petroleum products experienced sequential increases, the overall fuel and power index remained subdued, contributing to the softening trend in headline wholesale prices.

Manufactured products inflation also moderated, reflecting easing price pressures in metals and several industrial inputs.

However, a few categories, including jewellery, tobacco, pharmaceuticals, and select fabricated metals, showed sequential firming, suggesting that global commodity price movements could add some upward pressure ahead.

- ANI

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Reader Comments

R
Rohit P
Good to see tomato and onion prices cooling down. These two items alone can wreck our monthly budget. Hope the government ensures this trend continues beyond just seasonal factors.
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Arjun K
While the short-term outlook looks positive, I'm concerned about FY27. Base effect or not, we need sustainable agricultural policies, not just relying on monsoon luck every year.
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Sarah B
As someone working in retail, I can confirm wholesale prices have eased significantly. Our procurement costs for vegetables and pulses are down 15-20% compared to last quarter. Great for both businesses and consumers! 👍
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Vikram M
The report mentions global commodity prices could add upward pressure. With ongoing geopolitical tensions, we need to be prepared. Food security should remain our top priority.
M
Michael C
Interesting analysis, but I wish they'd provided more concrete policy recommendations. Temporary relief is good, but what about long-term structural reforms in agriculture supply chains?
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Ananya R
As a farmer's daughter, I hope these predictions translate to better prices for farmers too. Often when wholesale prices fall, farmers suffer while middlemen still profit. The system needs balancing.

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